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Author: 

U.S.  Federal  Trade 
Commission 

Title: 

Report  of  the  Federal 
Trade  Commission  on 

Place: 

Washington,  D.C. 

Date: 

1923 


MASTER   NEGATIVE   # 


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ViCTOK  MuRDOCK,  Chttirvmn. 
John  F.  Nugent. 
Huston  Thompson. 
Vernon  W.  Van  Fleet. 
Nelson  B.  Gaskill. 

Otis  B.Johnson,  SecreUiry. 


^' 


ADDITIONAL  COPIES 

or  THIS  PUBUCATION   MA.y   BK   PROCURFP  FBOM 

THK    SUPERINTKNDENT  OF  DOCUMENTS 

GOVERNMENT   PRINTING  OITICE 

WASHINGTON,  D.  C. 

AT 

15  CENTS  PER  COPY 


PURCHASER  AGREES  NOT  TO  RESELL  OK   DISTRIBUTE  THIS 
COPY  FOR  PROFIT.— PUB.  RES.  67.  APPROVED  MAY  11,  1022 


a 


) 


CONTENTS. 


Page. 

Acknowledgment ^''^'^ 

Letter  of  submittal ^^ 

Summary. 

Origin  and  scope ^^ 

Royal  Dutch  Co xi 

Shell  Transport  &  Trading  Co.  (Ltd.) xii 

Royal  Dutch-Shell  group *" 

Oil  bunkering  stations xiii 

Shell  Union  Oil  Corporation ^m 

Union  Oil  Co.  of  California xiv 

Asiatic  Petroleum  Co xr 

Other  foreign  interests xv 

Discrimination  a^inst  American  citizens XV 

British  Empire xvii 

France  and  French  possessions xviii 

The  Netherlands xviii 

Mexico XX 

Russia  and  Russian  Sakhalin xxi 

Other  European  countries xxi 

Central  and  South  American  countries xxii 

Asiatic  countries xxii 

Protective  measures xxii 

Chapter  I. — Origin  and  Scope  of  the  Report. 

Sec.  1.  Resolution  directing  the  inquiry 1 

Sec.  2.  Scope  of  the  report 1 

Sec.  3.  Source  of  information 2 

Chapter  XL — The  Royal  Dutch-Shell  Group. 

Sec.  1.  The  Royal  Dutch  Co '. 3 

Organization  and  development 3 

Financial  statements 5 

Income  accounts 6 

Dividends 7 

Sec.  2.  The  Shell  Transport  &  Trading  Co.  (Ltd.^ 8 

Organization  of  the  Shell  Co 8 

New  affiliations 8 

Financial  statements 9 

Income  accounts 11 

Dividends  paid 11 

Voting  power 11 

Sec.  3.  The  Royal  Dutch-Shell  group 11 

Organization  and  development 11 

Asiatic  Petroleum  Co 12 

Policy  of  the  group 12 

Cooperating  and  affiliated  companies 13 

Foreign  companies 14 

Sec.  4.  Outline  of  activities 14 

Crude  petroleum  production 14 

Proportion  of  world  production 16 

Petroleum  refineries 17 

Transportation  and  marketing 17 

Sec.  5.  Ix)cation  of  Royal  Dutch  production 17 

Sec.  6.  Oil-bunkering  stations 19 

III 


IV 


CONTENTS. 


Chaptep.   III. — Consolidation    op    Royal    Dutch-Shell    Interests    with 

Union   Oil  Co.  (Delaware). 

Page. 

Sec.  1.  Union  Oil  Co.  (Delaware) 21 

Preliminary  proceedings 21 

Union  Oil  Co.  of  California 21 

Financial  statements 22 

Sec.  2.  Merger  with  Royal  Dutch-Shell  interests 23 

Preliminary  procedure 23 

Shell  Union  Oil  Corporation 23 

Financial  details  of  the  merger 24 

Sec  '^.  Properties  of  Shell  Union  Oil  Corporation 27 

Acreage  of  oil  lands 27 

Crude  petroleum  production 28 

Potroleum  refineries  and  pipe  lines 29 

Marketing  equipment 30 

Sec .  4 .  Stock  ownership  of  Shell-Union  and  subsidiaries 30 

Shell  Union  Oil  Corporation 30 

Foreign  interests  in  Union  of  Delaware 31 

Union  Oil  Co.  of  California 32 

Dissolution  of  Union  Oil  Co.  (Delaware) 32 

Chapter  IV. — Foreign  Interests  in  the  United  States. 

Sec.  1 .  Policy  of  the  United  States 33 

Sec.  2.  Other  forei^  interests  in  the  United  States 34 

Sec.  ^.  Recent  activities  of  foreign  interests 35 

Pacific  Oil  C9 35 

Associated  Oil  Co 36 

Alleged  activities  of  Royal  Dutch-Shell 37 

Se<     1     JVotective  measures 37 

Ckmeral  leasing  law 37 

Union  Oil  Associates -^8 

Curtis  bill 38 

Phelan  bill 38 

Chapter  V. — Restrictive  Policies  and  Administr.\tive  Practices  of  For- 
eign Governments. 

Sec.    1 .  Statement  of  the  resolution 39 

Sec.    2.  Sources  of  information 39 

Sec.    3.  (leneral  attitude  of  the  principal  foreign  governments 39 

Sec.    4 .  British  restrictions 42 

The  United  Kingdom 42^ 

liritiah  India. 42 

The  Federated  Malay  States 45 

.\ustralia 45 

Northern  and  Western  A  ustralia 45 

Government  activity  in  Papua 46 

Queensland 46 

Mandate  of  New  Guinea 46 

New  Zealand 47 

British  Borneo 47 

British  North  Borneo 47 

J^runei 48 

Sarawak - 48 

Restrictions  in  Africa 48 

Nigeria 48 

Gold  Coast  Colony 48 

T'nion  of  South  Africa 49 

British  Fast  Africa 49 

T^ganda  and  Somaliland 49 

Egypt 49 

Mesopotamia  and  Palestine - -50 

British  Hondurap,  British  Guinea,  and  Jamaica 50 

Canada  and  Newfoundland 50 

Trinidad 51 

Barbados 51 


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Sec.    5. 

Sec.    6. 

'•' 

< 

Sec.    7. 
Sec.    8. 

Sec.    9. 


Sec.  10. 
Ser.  11. 


Sec.  12. 


CONTENTS.  V 

Page. 

Restrictions  in  France  and  P'rench  colonies 52 

General  policy 52 

San  Remo  agreement 52 

Restrictions  in  the  Netherlands 53 

Legal  restrictions 53 

The  Djambi  concession 54 

Policy  of  the  United  States 55 

Restrictions  in  Russia 56 

Restrictions  in  other  European  countries 56 

Poland. 56 

Rumania 57 

Italy - 57 

Greece 57 

Restrictions  in  Mexico 58 

Excessive  taxation 59 

Petroleum  rights  in  Federal  zones 60 

* '  Denouncements ' '  by  third  parties  on  American-owned  property .  60 

Dominican  Republic 61 

Restrictions  in  Central  and  South.America 61 

Costa  Rica 61 

Guatemala 61 

Ecuador 61 

(Jolombia 61 

Venezuela 61 

^      Peru 62 

Bolivia 62 

Argentina 62 

Restrictions  in  Asiatic  countries. . .". 62 

Persia 62 

China 63 

Japan 63 

Russian  Saklialin 64 

LIST  OF  TEXT  TABLES. 

Table    1.  Royal   Dutch   Co.  statement  of   issued  and  outstanding  common 

stock,  1890-1921 4 

2.  Balance  sheets,  of  the  Roval  Dutch  Co.,  for  December  31.  1920  and 

1921 1 5 

Stock  holdings  of  the  Royal  Dutch  Co.,  1920  and  1921 6 

Income  accounts  of  the  Royal  Dutch  Co.,  1920  and  1921 6 

Rates  of  cash  and  stock  dividends  paid  on  common  stock  of  the  Roval 

Dutch  (^o.  and  the  Shell  Transport  &  Trading  Co. ,  (Ltd. )  1902-1921 .  7 
Statement  of  the  authorized  capital  stock  of  the  Shell  Transport  & 

Trading  Co.  (Ltd.),  1897-1921 9 

Balance  sheets  of  the  Shell  Transport  &  Trading  Co.  (Ltd.),  Decem- 
ber 31,  1920  and  1921 9 

Stock  holdings  of  the  Shell  Transport  &  Trading  Co.  (Ltd.),  1919-1921.  10 

Income  accounts  of  the  Shell  Transport  &  Trading  Co.  (Ltd.),  1920-21 .  11 
Petroleum  production  of  the  Royal  Dutch-Shell  group,  in  barrels, 

1920-21 14 

Petroleum  production  for  the  world,  by  countries,  and  the  proportion 
controlled  by  the  Royal  Dutch-Shell  group,  in  barrels,  1920  and 

1921 16 

Balance  sheets,  of  the  Union  Oil  Co.  (Delaware),  December  31,  1920 

and  1921,  and  June  30,  1922 22 

Balance  sheet  of  the  Shell  Union  Oil  Corporation,  January  2,  1922. .  24 

Balance  sheet  of  the  Shell  Union  Oil  Corporation,  June  30,  1922. . . .  25 
Gross  assets  of  predecessor  companies  and  of  the  Shell  Union  Oil 
.  Corporation  as  of  December  31,  1921,  and  of  January  2  and  June 

30,1922 26 

Total  and  proven  acreage  of  predecessor  companies  December  31, 
1921,  and  the  Shell  Union  Oil  Corporation,  June  30,  1922,  classi- 
fied by  States 27 

Crude  petroleum  production  in  barrels,  of  companies  now  controlled 

by  the  Shell  Union  Oil  Corporation,  1921  and  first  half  of  1922. . .  29 


3. 
4. 
5. 


8. 

9. 

10. 

11. 


12. 

13. 
14. 
15. 


16. 


17. 


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fi     ) 


VI 


CONTENTS. 


Table  18.  Sharea  of  common  stock  outstanding  of  the  Shell  Union  Oil  Torpora- 
tion  and  subsidiaries,  Union  Oil  Co.  CDelaware"*,  and  the  Union 
Oil  Co.  of  California 

CHART. 

1.  List  of  affiliated  and  subsidiary  companies  of  the  Royal  Dutch-Shell  group 
owned  and  operated  in  the  United  States facing  page 

MAPS. 

1.  Crude-petroleum  production  and  proportions  of   Royal  Dutch-Shell  group 

and  of  American  producers  based  on  1921  output 

2.  Location  of  oil-bunkering  stations   of  Roval  Dut<;h-Shell  ,gioup,  Standard 

group,  and  other  large  companies 

LIST  OF  EXHIBITS. 

Exhibit  1.  Tabulation  of  affiliated  and  subsidiary  companies  of  Royal  Dutch- 
Shell  group  owned  and  operated  in  foreign  countries 

2.  Circular,  Union  Oil  Co.  of  California,  August  12,  1919 

3.  Circulars,  Union  Oil  Co.,  August  17,  1922 

4    Agreement  between  Union  Oil  Co.  (Delaware)  and  Anglo-Saxon 

Petroleum  Co.  (Ltd.),  October  19,  1921 

5.  Circulars,  Union  Oil  Co.  (Delaware),  November  3, 1921 ^. 

6.  Circular  of  Lee  Higginson  &  Co.,  regarding  preferred  stock  of  Shell 

Union  Oil  Corporation 

7.  Circulars,  September  26,  1922,  regarding  dissolution  of  the  Union 

Oil  Co.  (Delaware) 

8.  Circular,  October  17,  1921,  to  the  stockholders  of  Union  Oil  Co.  of 

California 

9.  Curtis  bill 

10.  Phelan  bill 

11.  Report  of  American  Petroleum  Institute  and  agreement  between 

Greek  Government  and  D'Arcy  Exploration  Co.  (Ltd.) 

12.  Editorials  on  monopoly  of  Burma  Oil  Co.,  The  Petroleum  Review, 

London,  July  22,  1905 

13.  Memorandum  of  British  Government  on  the  petroleum  situation, 

April  21,  1921 

14.  vSan  Remo  agreement 

15.  Letter  of  Standard  Oil  Co.  of  New  York,  February  24,  1922.. ..... 

16.  Agreement  between  the  Government  of  Trinidad  and  the  United 

British  West  Indies  Petroleum  Syndicate  (Ltd.) 

17.  Letter  Sinclair  Consolidated  Oil  Corporation,  August  1,  1922 

18.  Letter  Standard  Oil  Co.  (New  Jersey),  August  4,  1922 

19.  Letter  Mexican  Petroleum  Co.  (Ltd.),  July  28.  1922 

20.  Letter  Sinclair  Consolidated  Oil  Corporation,  February  2, 1923 

21.  Letter  Sinclair  Consolidated  Oil  Corporation,  November  3,  1922 

LIST  OF  APPENDIX  TABLES. 

Table   1.  Balance  sheet^s  of  the  Royal  Dutch  Co.,  December  31,  1917-1921 

2.  Stockholdings  of  the  Royal  Dutch  Co.,  1917-1921 

3.  Income  account-s  of  the  Royal  Dutch  (^o.,  1917-1921 

4.  Balance  sheets  of  the  Shell  Trans])ort  &  Trading  Co.  ^.td.),  Decem- 

ber 31 . 1917-1921 

5.  Income  accounts  of  the  Shell  Transport  &  Trading  Co.  (Ltd.),  1917- 

1921 

6.  Petroleum  production  of  the  Royal  Dutch-Shell  group,  in  barrels, 

1917-1921 * : .  - 

7.  Petroleum  production  for  the  world,  by  countries,  and  the  proportion 

controlled  by  the  Royal  Dutch-Shell  group,  in  barrels.  1917-1921 . . 

8.  Petroleum  production  is  Russia  (millions  of  poods\  1910-1914 

9.  Location  and  capacity  in  barrels  of  oil-bunkering  stations  for  large 

American    companies,    Royal     Dutch-Shell    group,    and    Anelo- 
Persian  Oil  Co 

10.  Balance  sheet  of  the  Shell  Union  Oil  Corporation,  January  2,  1922. . 


30 


14 


18 
20 


65 
70 

7 
/ 


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73 

78 

80 

85 

86 
89 
90 

90 

99 

100 
103 
105 

107 
125 
125 
126 
127 
127 


129 
129 
130 

1.30 

131 

131 

132 
133 


134 
139 


% 


V    ' 


CONTENTS. 


VII 


Page. 

Table  11.  Balance  sheets  of  the  Shell  Co.  of  California,  December  31,  1920 

and  1921,  and  June  30,  1922: 143 

12.  Balance  sheets  of  the  Roxana  Petroleum  Corporation,  December  31, 

1920  and  1921,  and  June  30,  1922 144 

13.  Balance  sheets  of  the  Ozark  Pipe  Line  Corporation,  December  31, 

1920  and  1921 144 

14.  Balance  sheet  of  the  Matador  Petroleum  Co.,  January  2,  1922 144 

15  Balance  sheets  of  the  Union  Oil  Co.  of  California,  December  31, 1920 

and  1921 -- 145 

16  Balance  sheets  of  the  Commonwealth  Petroleum  Corporation,  Decem- 

ber 31,  1920  and  1921 145 

17.  Balance  sheets  of  the  Columbia  Oil  Producing  Co.,  December  31, 

1920  and  1921 146 

18.  Balance  sheets  of  the  Western  ifnion  Oil   Co.,  December  31,  1920 

and  1921 146 

19.  Balance  sheets  of  the  United  Western  (Consolidated  Oil  Co.,  Decem- 

ber 31,  1920  and  1921 147 

20.  Balance  sheets  of  the  Dunlop  Oil  Co.,  December  31,  1920  and  1921.       147 

21  Balance  sheets  of  the  Eddystone  Oil  Corporation,  December  31, 

1920  and  1921 14S 

22  Balance  sheets  of  the  National  Exploration  Co..  December  31,  1920 

and  1921 148 

23.  Balance  sheet  of  the  Asiatic  Petroleum  Co.  (Delaware)  (Ltd.\  June 

30   1922 148 

24    Balance  sheet  of  the  Asiatic  Petroleum  Co.  (New  York)  (Ltd.),  June 

30,  1922 149 

25.  Balance  sheet  of  the  Asiatic  Petroleum  Storage  Co.  (Panama)  (Ltd. ), 

June  30   1922 149 

26.  Balance  sheet  of  the  Gold  Shell  Steamship  Co.,  June  30,  1922 149 

27.  Balance  sheet  of  the  Silver  Shell  Steamship  Co.,  June  30,  1922 150 

28.  Balance  sheet  of  the  Pearl  Shell  Steamship  Co.,  June  30,  1922 150 

29.  Balance  sheet  of  the  New  Orleans  Refining  Co.  (Inc.),  June  30,  1922 .  150 

30.  Balance  sheets  of  the  Dundee  Corporation,  December  31, 1920,  and 

June  30,  1922 151 

31.  Balance  sheet  of  the  Union  Oil  Co.  (Delaware),  October  20,  1922. . .       151 

32.  Capital  investment  in  the  Mexican  petroleum  industry,  in  pesos, 

by  national  interests,  December  31,  1922 152 


V     ! 


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LETTER  OF  SUBMITTAL. 


ACKNOWLEDGMENT. 


The  commission  desires  to  mention  as  especially  contributinji:  to 
the  preparation  of  this  report  Messrs.  W.  H.  England,  J.  B.  Peat, 
T.  A.  Thibodeau,  and  A.  A.  Hartley. 


▼m 


Federal  Trade  Commission, 

Washington,  February  12,  1923. 
To  the  President  of  the  Senate: 

Sir:  The  Federal  Trade  Commission  submits  herewith  a  report  on 
foreign  ownership  in  the  petroleum  industry,  pursuant  to  Senate 
Resolution  311,  Sixty-seventh  Congress,  second  session. 

This  report  describes  the  organization,  development,  and  present 
status  of  the  Royal  Dutch-Shell  group,  with  special  reference  to  its 
holdings  in  the  iJnited  States,  and  particularly  the  absorption  of  the 
Union  Oil  Co.  (Delaware) ;  it  relates  the  facts  regarding  the  present 
ownership  and  control  of  the  Union  Oil  Co.  of  California  and  outlines 
the  situation  with  respect  to  discrimination  of  foreign  governments 
against  citizens  of  this  country  in  the  acquisition  and  development 
of  petroleum  producing  properties  in  foreign  lands. 

The  more  important  facts  developed  in  this  report  may  be  concisely 
stated  as  follows: 

1.  The  Royal  Dutch-Shell  group,  a  combination  of  the  Royal 
Dutch  Co.  and  the  Shell  Transport  &  Trading  Co.  of  London,  has 
world-wide  oil  investments,  including  numerous  refineries,  an  immense 
fleet  of  tank  ships,  and  petroleum  production  in  many  lands,  which, 
in  1921,  was  no  less  than  11  per  cent  of  the  world  output. 

2.  The  Royal  Dutch-Shell  group  in  February,  1922,  consummated 
a  merger  of  the  principal  properties  and  investments  of  the  Union 
Oil  Co.  (Delaware)  with  its  chief  American  subsidiaries  in  a  new 
company,  the  Shell  Union  Oil  Corporation. 

3.  The  Shell  Union  Oil  Corporation  now  controls  over  240,950 
acres  of  oil  lands  in  the  United  States;  has  about  3.5  per  cent  of  the 
total  output  of  crude  petroleum;  owns  extensive  properties  in  refin- 
eries, pipe  lines,  tank  cars,  and  marketing  equipment;  and  is  one 
of  the  larger  companies  in  the  domestic  petroleum  industry. 

4.  The  Union  Oil  Co.  (Delaware)  owned  about  26  per  cent  of  the 
stock  of  the  Union  Oil  Co.  of  California,  but,  to  prevent  the  Royal 
Dutch-Shell  group  from  gaining  control,  certain  stockholders  of  the 
Union  of  California  organized  an  American  controlled  holding  com- 
pany, which  now  o^^^ls  more  than  half  of  its  issued  stock. 

5.  The  most  important  instances  of  discrimination  by  foreign 
governments  against  citizens  of  this  country  are  the  exclusive  policies 
of  the  Governments  of  Great  Britain  and  the  Netherlands  in  respect 
to  the  oil  fields  of  India  and  the  Dutch  East  Indies,  and  the  1920 
San  Remo  agreement  of  Great  Britain  and  France  covering  the 
undeveloped  oil  fields  of  Mesopotamia  and  of  the  British  and  French 
Colonies. 

6.  Denial  of  reciprocity  of  treatment  to  citizens  of  this  country 
appears  to  exist  with  respect  to  the  petroleum  industr\^  of  Australia, 
British  Borneo,  certain  African  colonies,  British  Honduras,  British 


IX 


X  LKTTKPv   OF   TRANSMITTAL. 

Guiana  and  Trinidad:  France  and  French  possessions;  Italy,   and 
tlie  Netlierlands  and  its  dependencies. 

7.  Thus  forced  to  modify  its  historic  policy,  Congress  in  1920 
enacted  a  mineral  leasing  law  for  public  lands  whicTi  forbids  the 
acquisition  of  properties  by  the  nationals  of  any  foreign  country  that 
denies  reciprocity  to  Americans,  in  consequence  of  which  certain 
applications  for  petroleum  leaseholds  have  been  denied  to  the  Royal 
Dutch-Shell  group. 

What  further  efi'orts  may^  be  made  by  this  coznbinatioTi  to  accjuiro 
privately  owned  petroleum  lands  or  competing  oil  companies,  it  is, 
of  course,  impossible  to  predict,  or  how  far  antitrust  laws  may  be 
effective  to  prevent  them. 

The  supply  of  crude  petroleum  in  this  country  is  being  rapidly 
depleted  to  meet  the  requirements  of  a  growing  domestic  consumption 
and  foreign  trade.  The  sources  of  supply  of  the  domestic  industry 
are  concentrated  within  its  own  borders  and  in  Mexico,  while  those 
of  its  principal  competitor  are  widely  distributed  throughout  the 
whole  world.  It  appears  obvious  that  a  nation  having  widely  dis- 
tributed supply  and  storage  facilities  and  owning  the  means  of  dis- 
tribution will  have  certain  advantages  in  world  trade  against  one 
having  concentrated  supply. 
Respectfully, 

Federal  Trade  Commission, 
By  Huston  Thompson, 

Acting  Chairman. 

Attest: 

Otis  B.  Johnson,  Secretary, 


SUMMARY. 


\ 


Origin  and  Scope. 

This  report  on  the  foreign  ownership  in  the  petroleum  industry  of 
the  United  States  is  made  in  compliance  with  Senate  resolution  311, 
Sixty-seventh  Congress,  second  session.  This  resolution  directed  the 
commission  to  ascertain  the  ownership  by  persons  who  are  not  citizens 
of  the  United  States  of  the  shares  of  the  Union  Oil  Co.  (Delaware) ; 
the  Union  Oil  Co.  of  California;  and  the  Shell  Co.  of  California;  the 
interrelations  between  said  corporations,  their  interest  in  other  oil 
companies  in  the  United  States ;  the  acreage  of  oil  lands  in  the  United 
States,  which  is  held,  by  lease  or  otherwise,  by  these  concerns  or  their 
subsidiary  and  afTiliated  companies;  the  acreage  of  oil  lands  which 
has  been  acquired  bv  them  within  the  last  year;  what  measures  are 
now  being  pursued  by  them  to  further  extend  their  holdings  of  oil 
lands  in  this  country;  and  whether  Great  Britain,  the  British  Domin- 
ions, Holland,  Rumania,  or  other  countries  having  oil  lands  within 
their  territories  discriminate  against  American  citizens  with  respect 
to  the  ownership  of  oil  lands  or  with  respect  to  the  ownership  of  shares 
in  corporations  which  are  organized  to  exploit  and  develop  oil  lands 
or  engage  in  the  production  of  petroleum. 

In  order  that  the  significance  of  the  foreign  ownership  in  the 
petroleum  industry  of  the  United  States  may  be  fully  presented  it  is 
necessary  to  give  a  summary  of  the  world-wide  operations  of  the 
Royal  Dutch-Shell  group  and  of  their  subsidiaries  and  affiliated 
companies. 

Royal  Dutch  Co. 

A  r6sum6  of  the  organization  of  the  Royal  Dutch-Shell  group  is 
given,  tracing  the  parent  companies,  the  Koninklijke  Nederlandsche 
Maatschappij  tot  Exploitatie  van  Petroleumbronnen  in  Nederlandsch- 
Indie,  commonly  called  the  Royal  Dutch  Co.,  and  the  Shell  Transport 
&  Trading  Co.  (Ltd.),  from  their  inception  down  to  their  most  recent 
acquisitions  in  the  United  States. 

The  Royal  Dutch  Co.,  which  was  organized  in  the  Netherlands  in 
May,  1890,  for  the  purpose  of  developing  petroleum  lands  in  the 
Dutch  East  Indies,  nas  been  for  many  years  the  most  iniportant 
factor  in  the  petroleum  industry  of  the  Dutch  East  Indies.  Its 
production  in  the  Dutch  East  Indies  increased  from  about  300,000 
barrels  in  1893  to  16,069,000  barrels  in  1921  and  it  now  has  about  90 
per  cent  of  the  total  production  of  those  islands. 

The  issued  and  outstanding  common  stock  was  increased  from 
1,300,000  florins —$522,600  at  normal  exchange — at  the  time  of 
organization  in  May,  1890,  to  321,457,000  florins  ($129,226,000)  in 
1921. 

A  statement  of  the  earnings  of  this  company  during  its  earlier 
years  is  not  available,  but  its  net  income  for  the  5-year  period  1917- 
1921  increased  from  about  44,400,000  florins  ($17,850,000)  in  1917  to 

XI 


fi 


ii***^' 


XII 


SUMMARY. 


129,500.000  florins  ($52,060,000)  in  1920  and  then  declined  to 
104,100,000  florins  ($41,850,000)  in  1921.  During  the  20-year  period 
1902-1921  this  company  paid  to  the  common  stockholders  an  annual 
average  dividend  of  nearly  42  per  cent.  As  the  Royal  Dutch  Co.  is  a 
holding  company,  its  earnings  are  dependent  upon  the  dividends 
declared  by  its  subsidiary  and  affiliated  companies  and  they  do  not 
necessarily  show  the  profitableness  of  the  business  which  it  controls. 
Starting  as  a  local  enterprise  in  the  Dutch  East  Indies  in  1890, 
the  company  became  an  important  international  factor  when,  in  1907, 
it  affiliated  with  the  Shell  Transport  &  Trading  Co.  (Ltd.) .  These  two 
companies,  together  with  the  Rothschild  Russian  interests,  had 
organized  the  Asiatic  Petroleum  Co.  in  1903  to  act  as  a  joint  dis- 
tributing agent  for  their  products  for  certain  parts  of  their  trade. 
Subsequently  the  Royal  Dutch  Co.  acquired  additional  properties  in 
the  Dutch  East  Indies.  When  the  Royal  Dutch  and  the  Shell 
interests  became  affiliated  in  1907,  two  new  companies  were  organized, 
the  J3ataafscho  Petroleum  Co.,  capitalized  at  140,000,000  florins 
($56,280,000),  and  the  Anglo-Saxon  Petroleum  Co.,  with  a  capital 
of  £8,000,000  ($38,932,000),  which  took  over  the  properties  of  both 
the  Royal  Dutch  and  the  Shell  companies.  The  Royal  Dutch  Co. 
then  became  a  holding  company,  owning  60  per  cent  of  the  stock 
of  the  above-mentioned  companies,  while  the  Shell  Transport  & 
Trading  Co.  owned  the  remaining  40  per  cent. 

Shell  Transport  &  Trading  Co.  (Ltd.). 

This  company  was  incorporated  in  England  in  October,  1897,  as  a 
transporting  and  distributing  company,  with  an  authorized  capital 
stock  of  £1,800,000  ($8,760,000).  As  already  stated,  in  1907  it 
became  closely  affili-ated  with  the  Royal  Dutch  Co.  Its  authorized 
capital  stock*  in  1907  was  £3,500,000  ($17,033,000),  which  was 
increased  to  £33,000,000  ($160,595,000)  by  1921,  with  £21,365.000 
($103,973,000)  outstanding. 

This  company  owns  40  per  cent  of  the  stock  in  the  various  sul)- 
sidiaries  of  the  Royal  Dutch-Shell  group,  and  the  value  of  its  shares 
in  these  subsidiary  companies  increased  from  about  £9,511.000 
($46,285,000)  in  1917  to  £20,257,000  ($98,581,000)  in  1921. 

A  statement  of  the  earnings  of  the  company  during  its  earlier 
years  is  not  available,  but  for  the  five-year  period  1917-1921  its  earn- 
ings increased  from  £2,640,000  ($12,848,000)  in  1917  to  £7,630,000 
($37,130,000)  in  1920,  and  then  declined  to  £5,490,000  ($26,705,000) 
in  1921.  During  the  13-year  period  1909-1921  it  paid  an  average 
annual  dividend  of  31  per  cent  to  its  stockliolders.  As  in  the  case  of 
the  Royal  Dutch  Co.,  it  is  a  holding  company  and  its  earnings  are 
dependent  upon  the  dividends  declared  by  its  subsidiary  and  aifiliated 
companies,  consequently  they  do  not  necessarily  show  the  profitable- 
ness of  the  business  which  it  controls. 

Royal  Dutch-Shell  Group. 

The  extraordinar}^  ramifications  of  the  Royal  Dutch-Shell  group 
inay  be  judged  from  the  list  of  subsidiary  companies  shown  in  appen- 
dix, Exhibit  1,  page  65.  At  the  present  time  the  Royal  Dutch-Shell 
group,  in  addition  to  its  possessions  in  the  Dutch  East  Indies,  owns 


V 


<     . 


summary. 


XIII 


exclusive  or  important  petroleum  properties  in  Sarawak  (British 
Borneo),  Rumania,  Egypt,  Venezuela,  Trinidad,  Mexico,  and  the 
United  States;  and  it  controls  5  refineries  in  the  United  States  with 
a  daily  capacity  of  65,000  barrels,  4  in  Mexico  with  a  daily  capacity 
of  155,000  barrels,  1  in  Venezuela,  1  in  Trinidad,  1  in  Curacao,  1  in 
Suez,  and  others  in  P^irope^and  the  Orient,  together  with  compres- 
sion plants,  storage  facilities,  and  other  equipment  in  different  parts 
t)f  the  world.  It  has  752  miles  of  trunk  pipe  lines  in  the  United  States 
and  about  240  miles  of  pipe  line  in  Mexico.  It  also  owais  or  controls 
about  1,144,000  tons  of  tankers,  barges,  and  tugboats. 

In  1921  the  Royal  Dutch-Shell  group  controlled  about  2  per  cent 
of  the  petroleum  production  of  the  United  States,  wliich  was  increased 
to  nearly  3 J  per  cent  in  the  first  six  months  of  1922.  From  its  present 
holdings  it  produced  9,043,000  barrels  of  crude  petroleum  (about 
50.000  barrels  daily)  during  the  first  half  of  1922,  and  in  October, 
1922,  it  was  producing  at  the  rate  of  80,000  barrels  daily.^ 

OIL   BUNKERING   STATIONS. 

The  Royal  Dutch-Shell  ^roup  operates  about  120  fuel-oil  bunkering 
stations,  iO  of  which  are  in  the  United  States.  Oil  bunkering  sta- 
tions (►perated  by  this  group  are  located  at  all  important  seaports 
throughout  the  world.  For  example,  a  British  steamer  leaving  New 
Yorkdty  on  a  voyage  around  the  world  calling  at  everv  important 
port  in  Europe,  along  the  Mediterranean,  in  India,  the  fiast  Indies, 
China,  Japan,  the  Philippines,  Australia,  New  Zealand  and  the  west 
coast  of  North  America,  and  then  returning  to  New  York  City  through 
the  Panama  Canal,  would  find  oil  bunkering  stations  operated  by  a 
member  of  the  Royal  Dutch-Shell  group  at  ever\'  important  port 
of  call. 

Shell  Union  Oil  Corporation. 

The  Union  Oil  Co.  (Delaware),  the  Roxana  Petroleum  Corporation, 
the  Shell  Co.  of  California,  and  their  subsidiaries  were  merged  on 
January  2,  1922,  and  the  Shell  Union  Oil  Corporation  was  organized 
February  8,  1922,  with  8,000,000  shares  of  common  stock  of  no  par 
value,  to  hold  their  properties.  The  Union  Oil  Co.  of  California, 
which  is  specified  in  the  resolution,  remains  an  American  controlled 
corporation,  although  the  Shell  Union  Oil  Corporation  owns  a  little 
over  26  per  cent  of  its  capital  stock. 

Through  the  acquisition  of  the  assets  of  the  Union  Oil  Co.  (Dela- 
ware) and  merging  practically  all  of  its  American  operations  under 
this  newly  organized  corporation,  the  Royal  Dutch-Shell  holdings 
rank  among  the  largest  in  the  petroleum  industry  of  the  United 
.States,  with  net  assets  on  June  30,  1922,  of  $205,000,000.  The  Shell 
Union  Oil  Corporation  controls  241,000  acres  of  oil  lands  in  the 
United  States,  34,000  of  which  are  proven  acreage,  with  2,114  pro- 
ducing wells.  During  the  first  six  months  of  1922  it  produced  9,043,- 
000  barrels  of  crude  petroleum,  an  average  of  about  50,000  barrels 
dailv.  During  1922  its  daily  production  has  increased  rapidly;  for 
example,  on  June  30,  it  was  65,000  barrels  and  in  October  80,000 
barrels.     It  has  a  daily  refining  capacity  of  51,000  barrels,  which  is* 

» Its  total  prodncJion  of  crude  petroleum  in  1922  was  17,543,.S62  barrels. 


l.-'J^' 


1  V 


■t^  ■■ 


XIV 


SUMMARY. 


now  being  substantially  increased  by  improvements  and  enlaroje- 
ments;  it  operates  752  miles  of  pipe  line  in  California  and  the  mid- 
continent  field  and  has  considerable  domestic  marketing  equipment. 
Of  the  8,000,000  shares  of  common  stock  issued  by  the  Shell  Union 
Oil  Corporation,  the  Rojral  Dutch-Shell  group  received  5,760,000.  or 
72  per  cent,  and  the  Union  Oil  Co.  (Delaware)  2,240,000,  or  28  per 
cent.  The  Union  Oil  Co.  (Delaware)  is  now  being  dissolved,  and 
155,000  of  its  2,240,000  shares  were  sold  to  liquidate  indebtedness, 
leaving  2,085,000  shares  which  are  to  be  divided  on  the  basis  of  one 
and  a  half  shares  of  Shell  Union  Oil  Corporation  stock  for  one  of 
the  Union  Oil  Co.  (Delaware)  stock.  The  commission's  recent  in- 
quiry has  shown  that  the  control  of  the  Union  Oil  Co.  (Delaware) 
was  clearly  domestic,  consequently  the  majority  of  these  shares  will 
apparently  pass  into  the  hands  of  citizens  of  the  United  States. 
According  to  the  merger  plan,  the  Royal  Dutch-Shell  group  nominated 
14  of  the  19  directors  of  the  Shell  Union  Oil  Corporation  and  the 
Union  Oil  Co.  (Delaware)  the  remainder,  but  since  the  latter  company 
is  being  dissolved,  apparently  the  Royal  Dutch-Shell  group  will  name 
all  of  trie  directors.  Sir  Heiiri  Deterding,  managing  director  of  the 
Royal  Dutch  Co.,  is  now  president  of  the  Shell  Union  Oil  Corporation. 

Union  Oil  Co.  of  California. 

The  Senate  resolution  directed  the  commission  to  ascertain  the 
facts  concerning  the  ownership  of  the  Union  Oil  Co.  of  California. 
Prior  to  the  World  War,  Andrew  Weir,  now  Lord  Inverforth,  obtained 
an  option  on  a  block  of  stock  in  the  Union  Oil  Co.  of  California,  and 
on  April  16,  1915,  there  were  issued  27,793  shares  of  Union  of  Cali- 
fornia stock  to  the  British  Union  Oil  Co.  In  1919  an  American 
syndicate  purchased  this  holding  from  the  British  Union  Oil  Co.,  and 
on  August  12,  1919,  entered  into  an  imderwriting  agreement  with 
the  Union  of  California  to  purchase  any  and  all  of  tne  certificates 
of  rights  which  might  be  tendered  prior  to  September  20,  1919.  On 
August  14,  1919,  the  above-mentioned  syndicate  organized  the  Union 
Oil  Co.  (Delaware),  which,  on  October  1,  1919,  owned  108,135  shares 
of  Union  of  California  stock;  this  holding  was  increased  to  130,869 
shares  by  December,  1920.  As  already  stated,  the  Union  Oil  Co. 
(Delaware) ,  was  merged  with  the  Royal  Dutch-Shell  interests  in  the 
United  States. 

When  the  merger  plans  of  the  Shell  Union  Oil  Corporation  becaine 
known  the  California  stockholders  of  the  Union  Oil  Co.  of  California, 
foreseeing  the  acquisition  of  that  company  by  the  Royal  Dutch-Shell 
interests,  organized  an  American  controlled  holding  company  called 
the  Union  Oil  Associates.  On  June  30,  1922,  the  Union  Oil  Co.  of 
California  had  500,000  shares  issued  and  outstanding,  of  which  130,869 
(or  slightly  over  26  per  cent)  were  held  by  the  Shell  Union  OU  Cor- 

E oration,  651  shares  were  held  by  other  foreign  owners,  273,833  shares 
y  the  Union  Oil  Associates,  and  94,647  by  other  citizens  of  the  United 
States.  • 

The  holding  of  the  Union  Oil  Associates  was  increased  to  274,738 

shares  in  October,  1922.     As  the  Union  Oil  Associates  was  organized 

■for  the  purpose  of  preventing  the  Royal  Dutch-Shell  group  from 

getting  control  of  the  Union  Oil  Co.  of  California  it  appears  that  its 

control  is  vested  in  the  hands  of  citizens  of  the  United  States. 


i*     "* 


'•. 


SUMMARY 


Asiatic  Petroleum  Co. 


XV 


In  1903  the  Asiatic  Petroleum  Co.  (Ltd.)  was  organized  by  the 
Royal  Dutch  Co.,  the  Shell  Transport  &  Trading  Co.,  and  the  Roths- 
child Russian  interest  as  a  distributing  agent  for  their  products.  This 
company  is  now  the  chief  representaitive  of  the  foreign  interests  ol 
the  Koyal  Dutch-Shell  group  in  the  United  States  and  is  principally 
engaged  in  the  oil  bunkering  business.  It  has  incorporated  a  number 
of  subsidiaries  in  various  States  in  this  country.  At  the  present  time 
(1923)  only  three  of  these  subsidiaries  are  active,  viz,  the  Asiatic 
Petroleum  Co.  (New  York),  the  Asiatic  Petroleum  Co.  (Delaware), 
and  the  New  Orleans  Refining  Co.  The  New  York  corporation  is  a 
purchasing  coinpany  and  buys  petroleum  products  and  oil  supplies 
for  export,  the  Delaware  corporation  is  a  holding  company,  while  the 
New  Orleans  Refining  Co.  operates  a  refinery.  Other  companies  were 
merely  organized  in  various  States  to  protect  the  name — Asiatic 
Petroleum  Co. 

Other  Foreign  Interests. 

Prior  to  1920  the  United  States  allowed  foreign  capital  the  same 
privileges  to  acquire  and  develop  its  natural  resources  as  was  granted 
its  own  citizens,  and  this  policy  was  often  taken  advantage  of  by 
citizens  of  the  more  important  foreign  nations.  Foreign  interests 
were  active  in  the  development  of  petroleum-producing  properties, 
particularly  in  California,  Wyoming,  and  the  mid-continent  oil 
fields.  Prior  to  the  World  War  certain  British  interests  had  an 
option  on  an  interest  in  the  Union  Oil  Co.  of  California,  which  was 
later  conveved  to  the  Union  Oil  Co.  (Delaware),  and  in  1921  about 
26  per  cent  was  acquired  by  the  Royal  Dutch-Shell  group,  which  is 
now  held  by  the  Shell  Union  Oil  Corporation. 

At  the  present  time  certain  British  interests  apparently  not 
identified  with  the  Royal  Dutch-Shell  group  are  actually  negotiating 
for  oil-producing  properties  in  the  mid-continent  oil  fields. 

Discrimination  Against  American  Citizens. 

In  its  incjuiry  regarding  discrimination  against  citizens  of  the 
United  States  in  respect  to  the  acquisition  and  operation  of  petro- 
leum properties  in  foreign  countries  the  commission  considered  the 
question  of  discrimination  from  two  points  of  view,  viz,  (1)  dis- 
crimination in  the  sense  that  foreign  governments  deny  to  citizens 
of  this  country  privileges  allowed  other  aliens,  and  (2)  discrimina- 
tion in  the  seiise  that  foreign  governments  deny  to  citizens  of  this 
country  privileges  similar  to  those  allowed  by  the  United  States  to 
the  citizens  of  such  foreign  countries. 

The  commission  devoted  especial  attention  to  the  question 
whether  there  was  discrimination  in  the  sense  that  foreign  govern- 
ments deny  to  nationals  of  the  United  States  privileges  in  respect 
to  its  petroleum  resources  that  are  granted  to  citizens  of  other 
(•ountries.  The  nearest  approach  to  this  sort  of  discrimination 
found  by  the  commission  consisted  in  the  action  of  the  British  > 
and  Frencli  Governments  in  1920  in  entering  into  the  San  Remo 
agreement,  which  agreement  is  apparently  being  modified  to  some 
extent. 


^1!!^^^ 


.".Iff 


^IMW" 


^ 


*f?f-5l 


XVI 


SUMMARY. 


SITMMARY. 


XVII 


Although  it  is  not  uncoiuinon  for  foreign  governments  to  place 
some  restrictions  upon  the  exploitation  of  the  petroleum  resources 
within  their  domain  by  aliens,  prominent  cases  of  exclusion  of  citizens 
of  the  United  States  which  have  been  brought  to  the  attention  of  the 
commission  were  in  British  India  and  the  Dutch  East  Indies.  In  the 
case  of  British  India  a  single  company,  the  Burma  Oil  Co.,  has  had 
a  monopoly  of  the  crude  petroleum  producing  business  m  the  oil 
fields  of  Burma.  The  Burma  Oil  Co.  is  partly  owned  by  the  Anglo- 
Persian  Oil  Co.  (Ltd.),  in  which  the  British  Government  is  mterested. 

American  interests  have  repeatedly,  but  unsuccessfully,  attempted 
to  obtain  oil  concessions  in  British  India,  and  as  early  as  1902  the 
United  States  consul  general  in  India  was  informed  that  the  Govern- 
!  ment  of  India  did  not  desire  ''  to  introduce  any  American  oil  companies 
or  their  subsidiaries  into  Burma."  At  that  time,  according  to, a 
statement  of  Samuel  Samuel,  now  a  managing  director  of  the  Shell 
Transport  &  Trading  Co.,  even  that  company  was  denied  concessions 
to  petroleum  lands  in  Burma  because  the  Government  of  India 
believed  there  was  a  combination  between  it  and  the  Standard  Oil  Co. 

According  to  a  letter  from  the  Standard  Oil  Co.  of  New  York  to 
]  the  Department  of  State  dated  February  24,  1922,  tbe  policy  of  the 
Government  of  India  with  respect  to  foreign  participation  in  the 
development  of  its  petroleum  resources  has  not  been  modified.  The 
opposition  to  American  companies  was  jiot  limited  to  the  acquisition 
or  development  of  oil  lands,  but  extended  to  the  ownership  of  refining 
and  distributing  facilities.  For  example*,  the  Standard  Oil  Co.  of 
New  York  was  not  allowed  to  purchase  a  warehouse  site  in  Burma. 

The  petroleum  agreement  entered  into  by  representatives  of  the 
Governments  of  Great  Britain  and  France  at  San  Remo  on  April  24, 
1920,  is  of  particular  interest  in  that  it  sets  forth  the  establishment  of 
certain  reciprocal  arrangements  as  between  these  two  Governments. 
(See  Exhibit  14,  p.  104.)  In  tliis  agreement,  which  refers  spedfically 
to  Rumania,  Asia  Minor,  territories  of  the  former  Russian  Empire, 
Galicia,  the  French  colonics,  and  the  colonies  of  the  British  Crown, 
both  Governments  promise  to  lend  aid  to  each  other  in  the  acquiring 
of  rights  to  petroleum  properties.  The  following  excerpts  from  the 
agreement  are  of  special  interest: 

14.  Northern  Africa  ami  other  colonu's.— The  French  (;overimieiit  will  accord  facilities 
to  any  British  grou])  or  groups  of  good  standing  which  can  offer  the  net  essary  guaranty 
which  will  operate  in  conformitv  with  French  legislation,  for  the  acquisition  of  petro- 
leum concessions  in  the  colonies  of  France,  or  in  French  protectorates  or  zones  of 
influence,  including  Algeria,  Tunis,  and  xMorocco.  It  is  well  to  point  out  that  the 
French  Parliament  has  decided  that  groups  formed  ur^der  these  cotjditions  a^^  obliged 
to  contain  at  least  07  per  cent  French  interests.  •     » i      • 

15.  The  French  Government  ^vill  facilitate  the  granting  of  oil  concessions  in  Algeria, 
which  are  now  liable  to  examination,  as  soon  as  the  api)licant8  have  complied  with  all 
the  requirements  of  French  legislation. 

16  Colonies  of  the  British  Crown.— As  far  as  the  existing  regulations  will  permit  the 
British  Government  will  accord  to  the  French  dependents  who  may  desire  to  explore 
and  exploit  petroleum  regions  in  the  Crown  colo  lies  a  ivaitages  corresponding  to  those 
France  has  accorded  to  British  subjects  in  the  French  colonies. 

The  San  Remo  agreement  also  contained  provisions  in  respect  to 
the  oil  fields  of  Mesopotamia,  as  follows: 

7.  Mesopotamia .^The  British  Government  binds  itself  to  concede  to  the  Frencli 
(iovernment  or  the  representative  appointed  by  same  25  ])er  cent  of  the  net  production 
of  crude  oil  at  the  current  market  i)rice  which  If.  B.  M.  Government  may  draw  from 
the  Mesopotamia  petroleum  regions  in  the  e\  ent  of  these  regions  being  made  produc- 
tive by  \drtue  of  Government  ex]>loitation:  or  in  the  event  the  Government  has 


recourse  to  a  private  company  to  exploit  the  Mesopotamia  petroleum  regions,  the 
British  Government  will  place  at  the  disposal  of  the  French  Government  a  participa- 
tion of  25  per  cent  in  the  said  company.  The  amount  to  be  paid  for  a  participation  of 
this  kind  should  not  exceed  the  amount  paid  by  any  other  participant  in  the  said 
petroleum  company.  It  is  also  agreed  that  the  said  petroleum  company  is  to  be  under 
the  permanent  control  of  Great  Britain. 

It  appears  that  the  Turkish  Petroleum  Co.  (Ltd.),  a  British  cor--> 
poration,  owned  50  per  cent  by  the  Anglo-Persian  Oil  Co.,  25  per 
cent  by  the  Roval  Dutch-Shell  group,  and  25  per  cent  by  the  French 
Government ,  claimed  title  to  all  petroleum  rights  in  Mesopotamia, 
pn  the  basis  of  a  concession  received  by  the  company  and  of  rights 
acquired  under  the  Bagdad  and  Anatolian  railway  grants.  On 
November  20,  1920,  in  a  note  to  the  British  Foreign  Minister  the 
Secretary  of  State  for  the  United  States  stated  that,  according  to 
this  Government's  information,  prior  to  the  war  the  Turkish  Pe- 
*  troleum  Co.  possessed  no  petroleum  rights  in  Mesopotamia. 

A  memorandum  issued  by  the  British  foreign  office  in  1921  states: 

The  whole  question  of  Mesopotamia,  which  has  been  fully  dealt  with  in  correspond- 
ence with  the  United  States  Government,  heed  not  be  referred  to  here  beyond  saying 
that  while  there  is  no  intention  of  discriminating  against  non-British  interests,  account 
must  be  taken  of  legitimate  rights  acquired  before  the  war,  and  this  applies  equally 
to  Palestine,  where  American  claims  are  understood  to  exist. 

According  to  a  dispatch  from  London,  dated  October  18,  1922, 
negotiations  concerning  the  participation  of  an  American  interest, 
>the  Standard  Oil  Co.  (New  Jersey),  in  Mesopotamia  were  progress- 
ing satisfactorily,  although  the  exact  share  which  it  was  to  receive 
had  not  been  definitely  determined. 

The  principal  foreign  nations  having  important  petroleum  de- 
• '  posits  have  discriminated  against  or  denied  reciprocal  treatment  to 
citizens  of  this  country,  with  respect  to  the  acqmsition  and  develop- 
ment of  their  petroleum  resources,  as  contrasted  with  the  principle 
of  reciprocity  and  equal  opportunity  which  was  the  policy  of  the 
United  States.  The  tendency  to  follow  closed-door  policies  was 
foimd  to  exist  particularly  in  those  countries  having  the  largest 
known  petroleum  deposits.  In  form,  such  discrimination  was  either 
legislative,  as,  for  example,  the  enactment  of  restrictive  laws;  con- 
tractural,  as  in  the  case  of  an  agreement  between  the  Government 
and  its  citizens  for  the  working  of  large  areas  to  the  exclusion  of 
aliens;  or  administrative,  as  where  the  granting  of  concessions  is 
left  to  the  discretion  of  some  executive  officer  who  favored  the 
nationals  of  his  own  country. 

The  policies  of  the  principal  foreign  governments  have  been  as 
follows: 

BRITISH   EMPIRE. 

As  indicated  above,  the  British  Government  adopted  a  policy 
of  complete  exclusion  of  aliens  in  respect  to  the  oil  fields  of  British 
India,  particularly  those  of  Burma.  According  to  a  memorandum 
issued  Dy  the  British  foreign  office  on  April  21,  1921,  the  following 
has-been  the  British  policy  in  India: 

Prospecting  or  mining  leases  have  been,  in  practice,  granted  only  to  British  subjects 
or  to  companies  controlled  by  British  subjects. 


35904—23- 


ii 


V 


^^JP 


isair 


!^ 


pf/'-^- 


XVIII 


SUMMARY. 


The  same  memorandum  stated  that  Brunei  (British  Borneo), 
Nigeria,  British  Guiana,  and  British  Honduras  have  similar  regula- 
tions to  Trinidad,  namely: 

In  the  case  of  private  lands  there  is  no  nationality  restriction,  but  the  lessees  of 
Crown  or  alienated  lands  must  be  British  subjects  or  a  British-controlled  company. 

The  memorandum  stated,  also,  that  there  are  no  nationality  re- 
strictions in  the  United  Kingdom,  British  North  Borneo,  Sarawak, 
Egypt,  SomaUland,  Jamaica,  or  Barbados;  that  exploitation  in  the 
northern  territory  of  Austraha  is  confined  to  British  registered  com- 
panies; and  that  there  is  no  general  prohibition  of  foreign  exploita- 
tion of  oil  lands  in  the  Union  of  South  Africa,  New  Zealand,  or  New- 
foundland. According  to  the  commission's  information,  the  mining 
law  of  western  Australia  contained  provisions  similar  to  those  of  the 
northern  territory;  and  in  Queensland  the  mining  law  provides 
that  petroleum  on  or  below  the  surface  of  all  land  is  the  property  of 
the  Crown.  In  the  mandate  of  New  Guinea  it  appears  tnat  the 
Australian  Government  has  adopted  a  poUcy  contemplating  com- 
plete jurisdiction  over  all  oil  operations  to  the  exclusion  of  all  other 
nationals. 

In  British  East  Africa  all  aliens  seem  to  be  excluded,  while  in  the 
Gold  Coast  colony  the  regulations  provide  that  concessions  shall  be 
granted  only  to  British  subjects  or  British-controlled  companies. 
Although  there  are  apptft-ently  no  specific  restrictions  against  aliens 
in  the  Federated  Malay  States,  it  is  said  that  concessions  may  be 
granted  only  on  terms  approved  by  the  British  Government. 

In  Canada  the  privilege  of  exploiting  petroleum  lands  is  restricted 
to  British  registered  companies,  and  recently  there  was  included  in 
leasing  laws  of  Canada  a  provision  practicall}^  identical  with  the 
reciprocity  clause  in  the  general  leasing  law  of  the  United  States. 

FRANCE    AND    FRENCH    POSSESSIONS. 

It  is  not  clear  what  the  laws  of  France  might  provide  regarding 
the  matter  of  petroleum  development  in  contmental  France  or  the 
French  colonies,  but  the  evidence  indicates  that  the  granting  of 
concessions  is  subject  to  the  discretion  of  the  Government,  which 
would  probably  grant  concessions  only  to  companies  at  least  67  ner 
cent  French-controlled.  The  commission  was  informed  by  the  Sin- 
clair Consolidated  Oil  Corporation  that — 

In  practice  it  has  been  found  that  P>ance  and  the  French  colonies  are  more  com- 
pletely closed  to  development  by  American  companies  than  in  any  other  part  of  th» 
world. 

The  petroleum  agreement  between "  France  and  Great  Britain 
signed  by  representatives  of  the  two  Governments  at  San  Remo  on 
April  24,  1920,  contained  mutual  promises  to  lend  aid  to  each  other 
in  the  acquisition  of  petroleum  properties,  and,  also,  clauses  in 
respect  to  reciprocal  privileges  in  the  territories  of  each  nation. 

THE    NETHERLANDS. 

The  present  important  petroleum-producing  territories  of  the 
Netherlands  are  located  in  the  Dutch  East  Indies.  According  to 
the  mining  laws  of  the  Dutch  East  Indies,  the  discovery  of  petroleum 


i 


SUMMABY. 


XIX 


does  not  entitle  the  discoverer  to  a  mining  concession;  to  mine 
petroleum  is  the  right  only  of  the  Government  or  persons  or  companies 
with  whom  contracts  are  entered  into  by  the  Government,  viz,  Dutch 
subjects,  inhabitants  of  the  Netherlands  or  of  the  Dutch  East 
Indies,  and  companies  incorporated  under  Dutch  laws,  either  in 
the  Netherlands  or  in  the  Dutch  East  Indies,  having  on  their  board 
of  directors  a  majoritv  of  Dutch  subjects. 

The  Royal  Dutch-Shell  group  appears  to  have  secured  possession 
practically  of  a  monopoly  of  the  production  of  the  Dutch  East  Indies. 
Although  the  Nederlandsche  Koloniale  Petroleum  Maatschappij,  a 
subsidiary  of  the  Standard  Oil  Co.  (New  Jersey),  has  small  holdings 
in  the  islands,  its  rights  are  said  to  be  of  little  commercial  value  and 
were  acquired  in  the  first  instance  not  from  the  Government,  but 
from  third  parties.  Under  date  of  August  4,  1922,  the  Standard 
Oil  Co.  (New  Jersey)  stated: 

*  *  *  Practically  we  have  found  a  discrimination  in  the  Dutch  East  Indies 
against  American  capital  through  the  refusal  of  the  Government  of  the  Dutch  East 
Indies  to  grant  prospecting  licenses  to  the  Nederlandsche  Koloniale  Petroleum  Maat- 
schappij or  to  grant  mining  concessions  except  in  cases  where  the  Nederlandsche 
Koloniale  Petroleum  Maatschappij  had  a  right  to  such  concessions  under  the  pro- 
visions of  the  old  mining  law  which  provided  that  discovery  of  a  mineral  under  a 
prospecting  license  gave  the  right  to  a  concession.  That  mining  law  has  Ijeen  abro- 
gated and  a  new  law  passed  which  leaves  the  granting  of  concessions  to  the  discretion 
of  the  Governor  General.  All  the  concessions  granted  to  the  Nederlandsche  Koloniale 
Petroleum  Maatschappij  were  granted  under  the  old  law  on  rights  secured  as  a  result 
of  the  discovery  of  the  mineral  on  prospecting  licenses  granted  to  third  parties  and 
purchased  by  the  Nederlandsche  Koloniale  Petroleum  Maatschappij. 

The  Djambi  fields,  in  south-central  Sumatra,  have  been  pronounced 
by  American  scientists  and  oil  experts  as  representing  substantially 
the  undeveloped  oil  wealth  of  the  Dutch  East  Indies.  When  it  be- 
came known  that  a  bill  sponsored  by  the  Government,  authorizing 
the  exploitation  of  these  oil  fields,  was  being  considered  for  intro- 
duction in  the  Netherlands  Parliament  the  American  Government 
immediately  took  up  with  representatives  of  that  GU)vernment  the 
matter  of  American  participation  in  this  exploitation;  but  on  No- 
vember 22,  1920,  the  bill  was  introduced  in  the  Netherlands  Parlia- 
naent,  and  from  an  explanatory  memorandum  accompanying  the 
bill  it  appeared  that  the  Bataafsche  Petroleum  Co.,  a  subsidiary  of  the 
Royal  Dutch-Shell  group,  was  to  be  granted  exclusive  rights  to  the 
concession. 

Before  the  adoption  of  the  Djambi  concession  bill  by  the  Nether- 
lands Parliament  additional  correspondence  was  exchanged  between 
representatives  of  the  two  Governments  on  the  subject  of  American 
participation.  The  United  States  Government  called  attention  to 
the  fact  that  American  citizens  had  found  it  practically  impossible 
to  acquire  any  petroleum  properties  in  the  Dutch  East  Indies,  while 
citizens  of  the  Netherlands  had  acquired  valuable  oil  properties  in 
the  United  States.  A  note  sent  by  the  United  States  Department  of 
State  to  the  Netherlands  legation  at  Washington,  under  date  of 
November  2,  1920,  read  in  part  as  follows: 

While  it  is  recognized  that  this  agreement  provides  for  the  dispoeition  of  only  one 
field,  it  is  understood  that  this  field  includes  the  most  valuable  of  the  remaining 
prospective  petroleum  territories  in  the  Netherlands  East  Indies,  and  that  American 
companies  thus  far  have  been  unsuccessful  in  requests  for  a  share  in  the  concession. 
Frankness  requires  me  to  state  that  the  disposition  of  this  field  at  the  present  time, 
in  the  manner  stipulated  by  the  proposed  agreement,  impresses  this  Government  as 


-7*.^ 


*■•.:. 


^^^m:- 


i>:^. 


-^s 


XX 


SUMMARY. 


an  indication  of  a  policy  to  exclude  companies  controlled  by  American  citizens  from 
the  petroleum  industry  of  the  Netherlands  East  Indies. 

The  representations  of  the  American  Government  were  ineffectual, 
the  bill  having  been  adopted  by  the  Netherlands  Parliament  without 

modification. 

In  view  of  the  granting  to  the  Royal  Dutch-Shell  group  of  a  prac-^ 
tical  monopoly  of  the  production  of  the  Dutch  East  Indies,  and  of  the 
exclusion  of  American  interests  in  those  islands,  it  is  not  surprising 
that  the  United  States  Department  of  Interior  recently  refused  to 
grant  the  Shell  Co.  of  California— a  Royal  Dutch-Shell  subsidiary— a 
permit  to  prospect  certain  supposed  oil-bearing  lands  in  Utah  until 
the  Shell  Co.  is  able  to  satisfy  the  department  that  the  Governments 
of  Great  Britain  and  the  Netherlands  do  not  discriminate  against 
Americans.  In  its  decision  the  Interior  Department  followed  the 
provisions  of  the  general  leasing  law  of  February  25,  1920. 

MEXICO. 

Prior  to  the  adoption  of  the  Mexican  constitution  of  1917  there 
was  no  restriction  in  Mexican  laws  against  foreign  acquisition  and 
development  of  petroleum  properties  in  Mexico,  and  immense  sums 
were  expended  for  this  purpose  by  foreign  interests,  especially  by 
citizens  of  the  United  States.  At  the  present  time  over  70  per  cent 
of  the  Mexican  oil  production  is  controlled  by  United  States  interests.' 

The  constitution  of  1917,  article  27,  provided  that: 

The  ownership  of  lands  and  waters  comprised  within  the  limits  of  the  national 
territory  is  vested  originally  in  the  nation  which  has  had,  and  has,  the  right  to  transmit 
title  thereof  to  private  persons,  thereby  constituting  private  property. 

♦  ♦  *  *  *  *  * 

*  *  *  In  the  nation  is  vested  the  legal  ownership  (dominio  directo)  of  all  min^ 
erals    *    *    *    petroleum,  and  all  hydrocarbons— solid,  liquid,  or  gaseous. 

Legal  capacity  to  acquire  ownership  of  lands  and  waters  of  the  nation  shall  be 
governed  bv  the  following  provisions:  . 

I  Only  Mexicans  by  birth  or  naturalization  and  Mexican  companies  Have  tne 
right  to  ac<iuire  ownership  in  lands,  waters,  and  their  appurtenances,  or  to  obtain  con- 
cisions to  develop  mines,  waters,  or  mineral  fuels,  in  the  Republic  of  Mexico.  The 
nation  mav  grant  the  same  right  to  foreigners,  provided  they  agree  before  the  depart- 
ment of  foreign  affairs,  to  be  considered  Mexicans  in  respect  to  such  property,  and 
accordingly  not  to  invoke  the  protection  of  their  Governments  in  respect  to  the  same, 
under  penaltv  in  case  of  breach,  of  forfeiture  to  the  nation  of  property  eo  acquired. 
Within  a  zone  of  100  kilometers  from  the  frontiers  and  of  50  kilometers  from  the  sea- 
coast,  no  foreigner  shall  under  any  conditions  acquire  direct  ownership  of  lands  and 

waters. 

♦  ♦♦♦*** 

This  constitution,  like  the  old  constitution,  provided  against  giving 

retroactive  effect  to  any  law  to  the  prejudice  of  any  person  what- 

soever. 

Various  decrees  bearing  upon  the  enforcement  of  article  27  of  the 
new  constitution  were  issued.  In  reference  to  the  first  of  these 
decrees,  which  related  to  taxation,  a  note  sent  by  the  United  States 
Government  to  the  Mexican  Government  on  April  2,  1918,  stated: 

While  the  I  nited  States  Government  is  not  disposed  to  request  for  its  citizens 
exemption  from  the  payment  of  their  ordinary  and  just  share  of  the  burdens  of  taxation, 
so  long  as  the  tax  is  uniform  and  not  discriminatory  in  its  operaUon,  and  can  fairly  be 
considered  a  tax  and  not  a  confiscation  or  unfair  imposition,  and  while  the  Lnited 

« The  capital  investment  of  different  interests  on  Dec.  31.  1922.  was  as  follows:  American,  58.2  per 
cent;  British,  .33.1  per  cej.t;  Dutch,  6.8  per  cent;  Mexican,  1.1  jcr  cent;  all  other,  0.8  per  cent. 


-^      § 


SUMMARY. 


XXI 


States  Government  is  not  inclined  to  interpose  in  behalf  of  its  citizens  in  caee  of 
expropriation  of  private  property  for  sound  reasons  of  public  welfare,  and  upon  just 
compensation  and  bv  legal  proceedings  before  tribunals,  allowing  fair  and  equal 
opportunity  to  be  heard  and  giving  due  consideration  to  American  rights,  nevertheless 
the  United  States  can  not  acquiesce  in  any  procedure  ostensibly  or  nominally  in  the 
form  of  taxation  or  the  exercise  of  eminent  domain,  but  really  resulting  in  confiscation 
of  private  rights  and  arbitrary  deprivation  of  vested  rights. 

On  March  12,  1920,  President  Carranza  signed  a  decree  relating 
to  the  development  of  petroleum  in  the  subsoil  of  the  Federal  zones, 
which  was  supplemented  on  July  10,  1920,  by  an  official  circular 
prescribing  the  conditions  under  which  concessions  would  be  granted. 
American  oil  companies  informed  the  State  Department  that  the 
decree  and  circular  threatened  confiscation  of  rights  already  acquired 
by  them,  and  the  United  States  Government  informed  the  Mexican 
authorities  that  it  could  not  ''remain  insensible  to  the  rights  of  its 

citizens." 

According  to  reports  made  to  the  commission  by  domestic  oil  com- 
panies, a  number  of  ''denouncements"— that  is,  claims  filed  by  due 
legal  process— were  filed  by  third  parties  against  lands  outside  of 
Federal  zones  which  had  been  owned  or  leased  by  citizens  of  the 
United  States  and  the  Mexican  authorities  had  denied  them  permits 
to  drill  upon  such  lands. 

RUSSIA    AND    RUSSIAN    SAKHAF.IN. 

Nationalization  of  the  country's  petroleum  resources  is  among  the 
policies  of  the  Russian  Socialist  Feaerated  Soviet  Republic,  and  pur- 
suant thereto  control  of  oil  fields  was  taken  without  regard  to  o\\Tier- 
ship  and  without  compensation. 

In  Russian  Sakhalin  the  filing  of  claims  to  petroleum  lands  was 
prohibited  by  the  former  Russian  Empire  after  January  1,  1915. 
Early  in  1923  the  Sinclair  Consolidated  Oil  Corporation  secured  from 
the  Russian  Government  at  Moscow  the  prospecting  rights  to  all  of 
Russian  Sakhalin,  but  with  the  obligation  to  reduce  its  holdings  to 
1,000  square  versts,  or  280,800  acres,  within  five  years. 

OTHER  EUROPEAN  COUNTRIES. 

The  quantity  of  crude  petroleum  produced  in  Italy  is  about  5  per 
cent  of  its  consumption.  Although  foreigners  are  not  specifically 
excluded  from  the  acquisition  and  development  of  petroleum  lands 
by  the  Italian  laws,  yet  in  practice  the  Government  has  refused  to 
grant  concessions  to  aliens. 

Agitation  for  nationalization  of  the  petroleum  industry  in  Rumania 
has  not  yet  resulted  in  definite  legislation  to  that  effect.  By  a  decree 
of  November  27.  1918,  large  areas  of  land  were  expropriated  from 
both  native  and  foreign  owners  and  resold  to  peasants,  the  Govern- 
ment reserving  the  subsoil  rights.  Since  1909,  with  two  minor 
exceptions,  the  Government  has  withheld  the  granting  of  leases. 

In  Greece  the  Anglo-Persian  Oil  Co.  (Ltd.)  received  from  the 
Government  an  exclusive  concession  for  all  petroleum  rights  in  eastern 
and  western  Macedonia  for  an  exploration  period  of  5  years,  with  an 
option  for  a  SO-A'ear  exploitation  concession  in  certain  districts. 


2M 


XXII 


summ:ary. 


Poland  is  actively  engaged  in  producing  and  refining  petroleum, 
but  it  is  reported  tLat  owing  to  a  lack  of  native  cupital  the  Polish 
Government  will  grant  concessions  to  foreign  capitalists  under  any 
advantageous  conditions. 

CENTRAL    AND    SOUTH    AMERICAN    COUNTRIES. 

There  are  believed  to  be  no  restrictions  discriminating  between 
aliens  and  natitmals  in  Costa  Rica,  Bolivia,  Venezuela,  Ecuador, 
Colombia,  or  Peru,  with  the  exception  that  in  the  case  of  the  last- 
named  country  territory  within  50  kilometers  of  the  frontiers  is 
excluded  from  foreign  exploitation.  • 

In  Guatemala  leases  for  the  acquisition  of  petroleum  deposits  may 
be  acquired  only  by  native-born  or  naturalized  citizens  and  are  trans- 
ferable only  by  express  authority  of  the  Government  and  to  citizens 
of  the  Republic. 

All  oil  fields  in  Argentina  are  said  to  have  been  withdrawn  from 
private  ownership,  and  the  Government  is  directlv  engaged  in  pro- 
ducing and  refining  in  the  Comodoro  Rivadavia  fields. 

ASIATIC    COUNTRIES. 

In  Persia  title  to  petroleum  rights  in  the  southern  Provinces  is 
held  by  the  Anglo-Persian  Oil  Co.  (Ltd.).  In  addition,  the  same 
company  claimed  title  to  three  and  a  half  of  the  five  northern  Prov- 
inces by  purchase  from  a  party  named  Koshtaria,  to  whom  a  con- 
cession is  said  to  have  been  granted  on  May  28,  1901,  for  a  period  of 
60  years.  It  is  understood  that  the  Persian  Government  has  taken 
the  position  that  this  grant  is  invalid.  At  the  present  time — Feb- 
ruary, 1923 — two  American  companies,  the  Standard  Oil  Co.  (New- 
Jersey )  and  the  Sinclair  Consolidated  Oil  Corporation,  are  attempting 
to  secure  a  concession  from  the  Persian  Government. 

China  apparently  has  no  restrictive  laws  discriminating  between 
aliens  and  its  own  nationals. 

Article  o  of  the  Japanese  mining  law,  promulgated  by  imperial 
order  on  March  7,  1905,  provides  that: 

No  person  other  than  subjects  of  the  Empire  or  juridical  persons  duly  formed  in 
accordance  with  tlu;  laws  thereof  are  entitled  to  acquire  mining  rights. 

The  belief  is  expressed  that  the  meaning  of  ''juridical  persons"  in 
Japanese  law  is  such  that  it  is  practically  impossible  for  foreign  com- 
panies to  retain  or  transfer  undisputed  possession  of  mining  rights  in 
the  Empire. 

Protective  Measures. 

During  the  past  few  years  there  has  been  considerable  agitation 
both  in  and  out  of  Congress  regarding  the  importance  of  an  adequate 
future  supply  of  crude  petroleum  for  this  country.  On  February  25, 
1920,  the  United  States  Congress  enacted  the  general  leasing  law, 
which  contains  the  following  provision: 

That  citizens  of  another  country,  the  laws,  customs,  or  regulations  of  which  denv 
similar  or  like  privilege*'  to  citizens  or  corporations  in  this  country,  shall  not  by  stock 
ownership,  stock  lioldings,  or  stock  control,  own  any  interest  in  any  lease  acquired 
under  the  pro\nflionH  of  tnis  act. 


"W 


lSi^^^BmJ^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


Chapter  I. 


ORIGIN  AND  SCOPE  OF  THE  REPORT. 

Section  1.  Resolution  directing  the  inquiry. 

An  inquiry  into  the  ownership  and  control  of  oil  lands  in  the  United 
States  by  foreign  interests,  the  interrelations  of  such  interests,  and 
whether  there  is  any  discrimination  by  foreign  governments  against 
American  citizens  in  the  exploitation  and  development  of  oil  lands 
abroad,  was  directed  bv  Senate  Resolution  311,  Sixtv-seventh 
Congress,  second  session,  introduced  by  Senator  King,  which  w^as 
adopted  by  the  Senate  on  June- 29,  1922.  The  text  of  tliis  resolution 
reads  as  follows: 

Resolved,  That  the  Federal  Trade  Commission  investigate  and  report  to  the  Senate 
respecting  the  ownership  by  persons  who  are  not  citizens  of  the  United  States  of  the 
shares  of  the  Union  Oil  Company,  a  corporation  of  Delaware;  the  Union  Oil  Company, 
a  corporation  of  California;  and  the  Shell  Oil  Company,  a  corporation  of  California;  the 
interrelations  between  said  corporations;  the  interest  of  said  corporations  in  other 
corporations  in  the  United  States;  whether  or  not  Great  Britain,  the  British  Dominions, 
Holland.  Rumania,  or  other  countries  ha\dng  oil  lands  within  their  territories  dis- 
criminate against  American  citizens  with  respect  to  the  ownership  of  oil  lands,  or 
with  respect  to  the  ownership  of  shares  in  corporations  which  are  organized  to  exploit 
and  develop  oil  lands  or  engage  in  the  production  of  petroleum:  the  acreage  of  oil 
lands  in  the  United  States  which  is  held,  by  lease  or  otherwise,  by  said  Union  Oil 
Company,  a  corporation  of  Delaware;  the  Union  Oil  Company,  a  corporation  of  Cali- 
fornia; and  the  Shell  Oil  Company,  a  corp>oration  of  California,  and  their  subsidiary 
and  affiliated  companies;  the  acreage  of  oil  lands  which  has  been  acquired  by  said 
corporations,  or  any  of  them,  within  the  last  year;  and  what  measures  are  being  pur- 
sued by  said  corporations  to  furtlier  extend  their  holdings  of  oil  lands  within  the 
United  States. 

The  demand  for  this  incjuiry  was  due  apparently  to  two  principal 
factors,  namely,  the  recent  merger  of  the  American  subsiaiaries  of 
the  Royal  Dutch-Shell  group  with  the  Union  Oil  Co.  (Delaware),  and 
a  recognition  of  the  vital  importance  of  an  adequate  future  supply  of 
petroleum  for  the  United  States.  Although  the  Senate  resolution 
did  not  specifically  mention  the  Royal  Dutch-Shell  combination,  the 
resolution  could  not  be  adequately  answered,  nor  could  the  real 
situation  be  shown  without  a  detailed  presentation  of  the  facts 
regarding  the  world-wide  holdings  of  this  group. 

Section  2.  Scope  of  the  report. 

This  report  includes  a  statement  of  the  organization,  investment, 
earnings,  and  important  subsidiaries  and  affiliated  companies  of  the 
Royal  Dutch-Shell  combination,  w^iich  includes  the  holdings  of  the 
Royal  Dutch  Petroleum  Co.  and  of  the  Shell  Transport  &  Trading 
Co.  (Ltd.).  The  headquarters  of  the  Royal  Dutch  Petroleum  Co. 
are  at  The  Hague  and  those  of  the  Shell  Transport  &  Trading  Co. 
(Ltd.)  at  London.     The  information  concerning  their  holdings  out- 


\ 


l>' 


2  FOB  ETON   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 

side  of  the  United  Slates  was  obtained  from  their  annual  reports  and 
other  public  soiu-ces.  A  more  intensive  study  was  made  of  the 
organization,  development,  and  earnings  of  those  companies  speci- 
fied in  the  resolution,  and  detailed  information  is  presented  regarding 
the  acreage  of  petroleum  lands  owned  or  leased  by  them,  the  loca- 
tion, mileage,  and  capacity  of  their  trunk  pipe  lines,  the  capacity 
and  location  of  their  refineries,  and  the  extensiveness  of  their  market- 
ing and  distributing  business.  The  proportion  of  the  stock  owned 
by  foreigners  in  eacn  of  the  compajiies  named  in  the  resolution  and 
thoir  holdings  in  other  companies  are  also  presented. 

Section  3.  Source  of  information. 

In  order  to  ascertain  the  facts  regarding  the  extent  of  the  f()reign 
cimtrol  in  the  companies  Jiamed  in  the  resolution  the  commission 
obtained  from  those  companies  and  from  their  subsidiary  and 
affiliated  companies  lists  of  their  prijicipal  stockliolders  and  complete 
lists  of  all  of  their  stockholders  residing  in  foreign  lands.  For  each 
of  the  companies  named  in  the  resolutioji  the  holdings  in  other  com- 
panies engaged  in  any  branch  of  the  petroleum  business  were  secured 
and  complete  information  obtained  conceniing  their  crude  petroleum 
production,  their  holdings  of  oil  lands  and  the  facts  concerning  the 
pipe  lines,  refineries,  and  marketing  equipment  owned  by  them. 
A  questionnaire  regarding  discriminatioji  by  foreign  governments 
was  sent  to  every  od  company  known  to  own  foreign  holdings  or  to 
have  attempted  to  secure  concessions  in  other  countries  recjuesting 
them  to  furnish  the  facts  with  reference  to  any  legal  or  administrative 
difficulties  which  they  had  encountered,  either  with  reference  to  the 
acquisition  or  exploitation  of  petroleum  lands,  or  with  respect  to  the 
ownership  of  sharas  in  corporations  engaged  therein.  Tne  officials 
of  the  American  Petroleum  Institute  and  of  its  foreign  relations 
committee  cooperated  with  the  commission  on  this  phase  of  the 
ijiquiry,  and  furnished  a  great  deal  of  information  thereon. 

As  already  stated,  the  data  concerning  the  production,  prooerties, 
hohUngs,  investment,  and  earnings  of  the  Royal  Dutch-Shell  coin- 
panios  operating  outside  of  the  United  States  were  secured  from  their 
annual  reports  and  from  other  published  sources.  The  information 
covering  these  data  was  secured  from  the  American  members  of  the 
Royal  Dutch-Shell  group  by  schedules.  The  reports  of  the  more 
important  companies  were  carefully  checked  by  the  examiners  of  the 
commission  with  their  books  and  records. 

The  statistical  and  general  information  regarding  the  petroleum 
industry  both  at  home  and  abroad  wivs  obtained  from  Federal 
bureaus  and  departments,  such  as  the  Departments  of  State,  Com- 
merce, and  Interior,  including  the  Geological  Survey  and  the  Bureau 
of  Mines. 

The  compajiies  named  in  the  resolution  and  all  of  the  oil  companies 
from  whicJK  the  commission  requested  information  cooperated 
heartily  and  greatly  facilitated  the  commission's  work.  Officials  and 
members  of  the  American  Petroleum  Institute  also  contributed  much 
valuable  information,  and  the  legal  representative  of  the  Royal 
Dutcli-Shell  group  in  the  United  States  rendered  material  assistance 
regarding  its  business  in  this  country. 


^  t 


Chapter  11. 
THE  ROYAL  DUTCH-SHELL  GROUP. 

Section  1.  The  Royal  Dutch  Co. 

Organization  and  development.— The  Royal  Dutch  (\).  (Konink- 
lijke  Nederlandsche  Maatschappij  tot  Exploitatie  van  Petroleum- 
bronnen  in  Nederlandsch-Indie)  was  organized  in  the  Netherlands 
in  May,  1890,  for  the  purpose  of  developing  petroleum  lands  m  the 
Dutch  East  Indies.  The  headquarters  of  the  company  are  at  The 
Hague  and  the  annual  meetings  are  held  at  Amsterdam.  The 
management  of  the  company  is  now  vested  in  four  directors  under  the 
supervision  of  a  board  of  commissaries.  Article  19,  of  the  Articles 
of  Association,  states: 

Art.  19.  The  company  shall  be  managed  by  three  directors  under  the  supervision 
of  at  least  five  and  at  most  nine  commissaries,  who  must  all  be  owners  of  registered 

The  directors  and  the  majoritv  of  the  commissaries  must  be  Dutchmen  or  domiciled 
in  Netherlands-India;  the  last  named  must  also  be  resident  in  the  Netherlands  or  in 
Netherlands-India. 

One  of  the  directors  shall  bear  the  title  of  general  director. 

In  the  event  of  an  equality  of  votes  among  the  directors  themselves  the  general 
director  has  a  casting  vote. 

As  above  stated,  there  are  now  four  directors.  The  method  of 
appointment  and  duties  of  the  commissaries  are  given  in  articles  20 
and  21,  as  follows: 

Art.  20.  The  commissaries  are  apix)inted  by  the  general  meeting  of  shareholders 

from  their  own  number.  ,    -t-i        -nu        a 

Each  year  one  of  them  shall  retire,  but  shall  be  immediately  reeligible.  Ihe  order 
in  which  they  retire  shall  be  regulated  by  rotation,  to  be  determined  by  drawing  lots. 
The  succeeding  commissaries  shall  replace  their  predecessors  according  to  such  rota- 
tion. The  commissaries  shall  elect  from  among  themselves  a  chairman  and  regulate 
the  order  or  rank  wherein  they  shall  replace  this  official  in  case  of  his  being  prevented 
from  attending  or  in  case  of  a  vacancv- 

Each  commissary  shall  at  all  times  have  the  right  U>  inspect  the  Iwoks,  correspond- 
ence, and  investments  of  the  company.  The  commissaries  jointly  shall  receive  the 
share  of  profits  pro\'ided  for  l)y  article  31,  whilst  traveling  and  living  expenses  are 

to  be  refunded  to  them.  .... 

Art.  21.  When  the  commissaries  are  (►f  opinion  that  there  is  maladministration, 
they  shall  have  the  right  to  suspend  the  p<m-er8  of  one  or  more  of  the  directors  and 
to  provide  temporarilv  for  the  discharge  of  his  or  their  duties;  in  this  case,  how- 
ever, they  are  bound  to  convene  an  extraordinary  general  meeting  of  shareholders 
within  a  month,  in  order  to  decide  whether  the  said  director  or  directors  shall  then 
be  removed  and  t«>  stipulate  the  time  and  manner  of  such  removal. 

The  provision  regarding  control  by  nationals  of  the  Netherlands 
is  strictly  enforced.     The  company's  annual  report  for  1921  states: 

Dr.  J.  Th.  Erb,  who,  as  stated  in  our  previous  report,  was  elected  director  on  the 
let  of  April,  1921.  but  who  was  able  to  take  up  his  functions  only  after  having  a^^med 
Dutch  nationality,  has  since  entered  upon  his  office,  the  bill  by  virtue  of  which  he 
has  been  granted  Dutch  nationality  having  been  passed. 

Doctor  Erb  was  a  citizen  of  SwitzerLand. 

Soon  after  its  organization  this  company  acquired  a  concession 
in  the  Dutch  East  Indies  which  had  been  granted  by  the  Emir  of 


TPr 


^p 


4  FOREIGN   OWNERSHIP  IN   THE  PETROLEUM   INDUSTRY. 

Langkat  for  a  period  of  75  years  dating  from  1883.  The  Royal 
Dutch  Co.  was  the  most  important  factor  in  the  development  of 
petroleum  production  in  the  Dutch  East  Indies.  The  annual  pro- 
duction in  the  Dutch  East  Indies  increased  from  about  300,000 
barrels  in  1893  to  about  7,770,000  barrels  in  1905:  in  this  latter  year 
the  Koyal  Dutch  Co.  controlled  about  3,655,000  barrels,  mcludmg 
403,000  barrels  from  Borneo.  The  petroleum  industr^^  of  the  Dutch 
East  Indies  at  this  time  was  almost  entirely  in  the  nands  of  a  few 
strong  companies  which  controlled  large  concessions  of  land.  It  is 
reported  that  in  Java  and  Sumatra  the  Royal  Dutch  Co.  had  about  , 
227,000  acres,  the  Moesi  Ilir  135,000  acres,  the  Dordtsche  Co. 
1,483,000  acres,  while  the  Shell  interests  controlled  500  square  miles 
in  Borneo.  There  were  a  number  of  other  companies,  such  as  the 
Moeara  ICnim,  Sumatra  Palembang,  and  Zuid  Perlak,  which  originally 
were  competitors  of  the  Royal  Dutch  Co.,  but  in  the  openmg  years 
of  this  centurv  the  latter  acxjuired  a  commanding  position  in  the 
local  industry'  by  means  of  acquisitions,  consolidations,  and  long- 
term  contracts  with  competing  concerns.  At  that  time  there  was 
strong  competition  in  Europe  from  the  petroleum  products  of  the 
United  States  and  Russia,  while  some  American  kerosene  was  also 
sold  in  Java  and  Sumatra  at  the  very  doors  of  the  Royal  Dutch 

reiineries. 

The  outstanding  capitalization  of  the  Royal  Dutch  Co.  at  the 
time  of  organization  was  1,300,000  florins,^  or  $522,600.  As  the 
activities  of  the  company  increased  additional  capital  was  required 
from  time  to  time.  The  following  table  shows  the  issued  and  out- 
standing common  stock  for  each  year  as  of  December  31,  1890-1921: 

T\BLE   1  —Royal  Dutch   Co.   statement    of  issued  and  outstaiylinq  common    stock, 

1890-1921. 


Year. 


1890.. 
1892.. 
1895.. 
1896.. 
1897.. 
1902.. 
1904.. 
1905.. 
1906.. 
1907  «. 


Florins.  1 


1,300,000 
1,700,000 
2,  aOO,  00(1 
3, 000, 000 
5,000,000 
6,000,000 

6,  m),  000 

9,900,000 
10,300,000 
39,780,000 


Year. 


Florins.' 


1909 44,418,000 

1911                           48,438,000 

1912:::;::::::!!.: 51,599,400 

1913 54,645,400 

1916 1  S.-),  527, 200 

1918  » ,  171,054,400 

1919 !  213,818,000 

1020                      1  320,727,000 

1921 '  321,457,000 


1  Florin— 40.2  cents. 


*  200  per  cent  stock  dividend. 


»  50  per  cent  stock  dividend. 


The  above  table  shows  only  the  common  stock  issued  and  out- 
standing. It  does  not  include  the  priority  and  preference  shares, 
of  which  there  were  30,000,  with  a  value  of  30,000,000  florins  ($12,- 
060,000),  outstanding  during  the  period  1917-1921.  The  total 
amount  of  the  common  stock  authorized  is  not  available  for  the  earlier 
years,  but  in  1917  it  aggregated  120,000  shares,  with  a  par  value  of 
120,000,000  florins,  of  which  34,472,800  florins  were  not  issued. 
The  common  stock  authorized  was  increased  to  200,000,000  florins 
in  1918  and  to  370,000,000  florins  in  1919,  not  all  of  which  was 
issued.     There   was   no   change   in    the   amount   of   common   stock 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  5 

authorized  in  1920,  but  in  1921  the  amount  authorized  was  increased 
to  570,000,000  florins,  of  which  321,457,000  florins  was  issued. 

Financial  statements. — The  investments  of  the  Royal  Dutch 
Co.  during  the  years  1920  and  1921  are  given  in  the  balance  sheets 
for  those  years,  as  shown  in  the  following  table: 

Table  2. — Balance  sheets  of  the  Royal  Dutch  Co.  for  December  SJ ,  1920  and  19^1 . 


Item. 


1920 


ASSETS, 


Unissued 
Shares  in 
Shares  in 
Shares  in 
Shares  in 
Shares  in 
Shares  in 
Shares  in 
Shares  in 
Shares  in 
Shares  in 


shares 

Bataafsche  Petroleum  Maal  schappij 

Anglo-Saxon  Petroleum  Co 

Shell  Co.  of  California 

Shell  Transport  <t  Trading  Co 

Asiatic  Petroleum  Co.  (Ltd.) 

Society  Anonyme  Astra  Romans 

Roxana  Petroleum  Corporation  (common). 
Roxana  Petroleum  Corporation  (preferred). 

Ozark  Pipe  Line  Corporation 

various  p)etroleum  companies 


Nominal  (par)  value 

Less  reserved  for  difference  between  par  value  and  book  value . 


Florins.^ 

49,273,000 

180,000,000 

11.'),  200, 001 

118,210.434 

26, 121,.V28 

25,200,000 

4,438,944 

44,940,000 

2,  too,  000 

20, 672, 400 

11,738,740 


1921 


Fluriv^.^ 

248,  ."vis,  000 

180,000,00 

1 1.5, 200, 000 

118,212,197 

26, 121,, 528 

2.-).  200, 000 

7,398,144 

44,940,000 

2,100,000 

20,672,400 

36, 767, 138 


597,895,046 
202,764,641 


825, 154, 407 
218,316,601 


Cash  in  iiand  and  at  bankers . 

Debtors 

Dividend  priority  shares 


395, 130, 405 

93,396,040 

1.54.556,418 

641.2.50 


606, 837, 80t) 

38, 690,  .5.)7 

94,261,621 

641,250 


Total 643,724,113  1      740,431,234 


LIABILITIES. 

Share  capital 370, 000, 000 

Preference  share  capital I       1, 500, 000 

Priority  share  capital i      28, 500, 000 

Unclaimed  dixidends 

Unclaimed  dividends  on  priority  shares 

Creditors 

Interest  account 

Undistributed  dividends 

Expenses  calculated  in  excess  on  bonus  shares,  1918 
Reserve  as  per  article  4  of  the  statutes 


901,102 

281,309 

77,718,309 

2,616,833 

927,664 

3,472,312 

28,353,220 

Profit  and  loss I    129, 4.50,  :i64 


570,000,000 

1,500,000 

28,500,000 

737, 545 

69,300 

2,545,152 

771,113 

"'32,'209i94(*i 
104,098,178 


Total 643,724,113 


740,431,234 


1  The  normal  value  of  a  Dutch  florin  or  gulden  is  402  cents  in  I'nite-I  States  money. 


1  Florin=40.2  cents. 

A  more  extended  exhibit  for  the  period  1917-1921  is  shown  in 
Appendix  Table  1,  page  129.  It  will  be  noted  that  the  authorized 
capital  stock  in  1917  was  150,000,000  florins,  including  all  classes  of 
shares.  The  common  stock  was  increased  80,000,000  florins  in  1918 
and  170,000,000  florins  in  1919.  In  1920  the  capitalization  remained 
unchanged,  but  in  1921  it  was  increased  200,000,000  florins,  making 
the  total  value  of  the  authorized  capital  stock,  including  common, 
preference,  and  priority  shares,  600,000,000  florins  ($241,200,000). 
The  shares  of  stock  in  tliis  company  have  a  par  value  of  1,000  florins, 
whik*  subshares  of  100  florins  have  also  been  issued.  These  shares  are 
listed  on  the  prominent  exchanges  in  Europe.  In  1917  the  shares  of 
the  Royal  Dutch  Co.  were  listed  on  the  New  York  Stock  Exchange 
and  are  known  as  '^New  York"  or  ''American"  shares,  having  a 
value  of  one- third  of  100  florins,  or  $13.40  at  normal  exchange. 
There  were  808,414  of  these  American  shares  listed  in  New  York  on 
June  30,  1922,  and  on  September  15,  1922,  they  were  quoted  at  $58 
per  share.  These  808,000  American  shares  represent  about  27,000 
lull  shares. 


'.$'■■    «!, 


;ff'TT^>' 


n* 

' ,'     V- 


6 


FOREIGN    OWNERSHIP    IN   THE   PETROLEUM   INDUSTRY. 


The  Royal  Dutch  Co.  is  a  holding  corporation  and  therefore  the 
balance  sheets  show  the  assets  as  amounts  of  stock  of  the  subsidiary 
companies,  debts  due,  and  cash,  which  are  the  only  items  the  jparent 
company  owns  directly.  The  following  table  shows  the  stock  held, 
distributed  by  the  respective  companies  for  the  years  1920-21,  while 
Appendix  Table  2  (p.  129)  shows  similar  information  for  the  period 
1917-1921: 

Table  ^.—Stockholdings  of  the  Royal  DutcJi  Co.,  1920  and  1921. 


Item. 


1920 


1921 


Foreign: 

Bataafschc  Pelroleiim  Maalschappij. 

Anglo-Saxon  Petroleum  Co 

Shell  Transport  &  Trading  Co 

Asiatic  Petroleum  Co 

Soc'iet  «^  Anonvme  Astra  Romana — 
\arioiis  potroieum  eomi)anies 


Total •  -  •  • 

I^ss  difference  between  par  and  book  value. 


Total 

American: 

Shell  Co.  of  California 

Roxana  Petroleum  Corporation. 
Ozark  Pipe  Lme  Corporation  — 


Total,  as  per  balance  sheets . 


1 

F/ort/M.> 

180,000,000 
115,200,000  i 
26,12l,52H  1 

I80,000,00t> 

115,200,000 

26,l2l,52K 

25.200,000  1 
4,438,944  j 

25.200,000 
7,398,144 

11,73H,740  i 

36,767,138 

362,699,212 
202,764,641 

390,686,810 
218,316,601 

159,934,571  i 

172, 370, '209 

nH,210,434 
47,040,000 
20,672,400  i 

118,212,197 
47,040,000 
20,672,400 

345,857,40}  ; 

:J58,294,806 

1  Florin  =•  40.2  cents. 


The  stock  of  the  principal  subsidiaries  is  held  by  the  Royal  Dutch 
and  Shell  interests,  in  the  proportion  of  60  per  ceiit  and  40  per  cent, 
respectively;  consequently,  the  amounts  shown  in  the  exhibit  for  the 
Royal  Dutch  Co.  must  be  supplemented  by  the  holdings  of  the  Shell 
interests  in  the  same  subsidiaries  in  order  to  show  the  total  capital- 
ization of  these  subsidiaries. 

Income  accounts.— The  earnings  of  tliis  company  for  the  years 
1920  and  1921  are  shown  in  the  following  table,  while  the  income 
accounts  for  the  period  1917-1921  are  given  in  Appendix  Table  3, 
page  130. 

Table  4.     Inconu  accounts  of  the  Roy(d  Dutch  Co.,  1920  atul  1921. 


Item. 


Dividends,  various  companies. 

Interest  and  exchange 

Dividends  lost  by  limitation . . 
Contractual  obligations 


1920 


Florins. 
133,032,541.23 
5,698,644.76 
5,020.50 


1921 


Florins. 
92, 192, 774. 73 
10, 576, 307. 60 
10.091.00 

4, 390, 770.  no 


Cross 


siruomc 138,736,206.49 


DEDUCTIONS. 


Loss  on  securities 

French  tax  on  priority  shares 

Administration  and  other  expenses. 

Expen.sc  renewal  dividend 

Contractual  obligations 

Reserve  for  tax  on  dividends 


48, 294. 59 

53,332.56 

328, 470. 19 

83, 605. 10 

8.  772, 140.  00 


Total  deductions 9,285,842.44 


Net  income I  129,450,364.05 


107, 169, 943. :« 


98,  879.  &■> 
439, 009.  00 
11.5,a50.82 


2,418,82.5.58 


3,071,76.5.  a5 


104,098,17^.28 


1 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUxM  INDUSTRY.  7 

Since  this  is  a  holding  company,  the  financial  statements  show 
neither  the  value  of  the  petroleum  lands,  refineries,  tankers,  and  other 
assets  owned  bv  the  company  nor  the  actual  sales,  expenses,  and 
profits  from  the  operations  for  any  given  year.  The  company  re- 
ceives only  the  dividends  accruing  to  the  holders  of  these  stocks, 
while  the  expenses  include  simplv  the  cost  of  administration,  taxes, 
etc.  The  income  for  1920  was  129,450,364  florins,  and  for  1921  it 
was  104,098,178  florins,  a  decrease  of  about  20  per  cent.  As  shown  in 
Appendix  Table  3  (p.  130),  the  income  in  1917  was  about  44,374,000 
florins,  which  increased  to  72,190,000  florins  in  1918  and  to  100,099,883 
florins  in  1919.  This  continuous  increase  from  1917  to  1920  and  the 
shght  dechne  in  the  depression  year  of  1921  may  well  be -considered 
a  fair  index  of  the  unusual  strength  and  stability  of  the  company. 

Dividends.— The  dividends  paid  by  this  company  for  the  period 
1902-1921  are  shown  in  the  following  table: 

T\BLE  5. — Rates  of  cash  and  stock  dividejids  paid  on  common  stock  of  the  Royal  Dutch 
Co.  and  Shell  Transport  dc  Trading  Co.  (Ltd.),  1902-1921. 


Royal  Dutch  Co. 


Shell  Transport  & 
Trading  Co.  (Ltd.). 


Year. 


Cash 
dividends. 


1902. 
1903. 
1904. 
1905. 
1906. 
1907. 
1908. 
1909. 
1910. 
1911. 
1912. 
1913. 
1914. 
1915. 
1916. 
1917. 
1918. 
1919. 
1920. 
1921. 


Per  cent. 
35.9 
65 
50 
50 
73 

27.8 
28 
28 
28 
19 
41 
48 
49 
49 
38 
48 
40 
45 
40 
31 


Stock  C>ish  Ptwlc 

dividends,  i  dividends.  \  dividends. 


Per  cent.    \    Per  cent.    \    Per  cent. 


200 


50 


22.5  !. 

22.5  |. 

20      I. 

30      !. 

35 

35 

35 

35 

35 

35 

35 

35 

27.5 


60 


Average. 


41.7 


31 


The  dividends  for  the  Shell  Co.  are  also  shown  on  this  table  and 
will  be  discussed  later.  As  indicated  in  the  exhibit,  the  dividends 
paid  by  the  Royal  Dutch  Co.  varied  from  a  maximum  of  73  per 
cent  paid  in  1906  to  a  minimum  of  19  per  cent  in  1911,  with  an  aver- 
age of  about  42  per  cent  for  the  20-Year  period.  The  dividend  rates 
were  particularlv  high  for  the  perio'd  1903-1906,  averaging  about  60 
per  cent.  From  1907  to  1911  the  annual  rates  paid  were  much 
lower,  averaging  about  26  per  cent.  From  1912  to  the  end  of  the 
period  the  rates  paid  were  less  than  40  per  cent  only  in  two  years — 
1916  and  1921 — while  the  average  was  almost  43  per  cent  for  the 
10-year  period. 

Stock  dividends  were  also  paid  on  two  occasions — in  1907,  when 
a  200  per  cent  stock  dividend  was  declared,  and  again  in  1918,  when 
the  .stock  dividend  rate  was  50  per  cent.  The  dividends  discussed 
above  were  those  received  by  the  holders  of  the  common  stock, 


m 


8 


FOKKKJN    OWNERSHIP   IX    THE   PETROLEUM   INDUSTRY. 


but  there  are  two  other  classes  of  stockholders  who  receive  dividends 
at  fixed  rates.  There  are  1,500  shares  of  the  preference  class  out- 
standing, and  the  dividend  rate  is  4  per  cent  per  annum.  The  priority 
shares  number  28,500,  and  the  rate  for  this  class  of  stock  is  4i  per 
cent  per^  annum.  All  classes  of  stock— ^preference,  priority,'  and 
common  -have  the  same  par  value  (1,000  florins),  ana  it  is  under- 
stood that  all  classes  of  stock  have  the  same  voting  powers  in  the 
general  meetings  of  the  shareholders. 

Section  2.  The  Shell  Transport  &  Trading  Co.  (Ltd.). 

Organization  of  the  Shell  Co. — This  company  was  incorpor- 
ated in  England,  October,  1897,  and  according  to  its  prospectus  of 
1902  it  was  formed — 

for  the  piirpoat';  of  amalgamating;  the  interests,  eomhininfj;  under  one  management, 
and  continiiint,'  the  development  of  the  tran8])ort  of  illuminating  oil,  mainly  by  meant* 
of  tank  steamers  and  its  storage  in  bulk,  wale,  and  distribution  in  India,  China, 
Japan,  and  the  Straits,  created  by  Messrs.  Arnhold,  Karberg  &  Co.,  Best  &  Co..  Hou- 
ytead  &  Co.,  Dclmege,  Forsyth  A  Co.,  Oraham  &  Co.,  W.  &  A.  (iraham  c^  Co.,  J.  .1. 
Riechmann  <k  Co.,  Rickmei-s  Reismuhlen,  Rhederei-und  Sehiffahrts-Aktien-Gesell- 
schaft,  M.  Samuel  &  Co.,  Samuel  Samuel  &  Co.,  Syme  &  (Jo.,  and  others. 

According  to  agreements  the  anaalgamation  of  interests  mentioned 
above  was  to  take  place  on  June  1,  1898.  The  authorized  capitaliza- 
tion was  £1,800,000  in  shares  of  £100  each,  which  was  later  changed 
to  £1  per  share.  The  balance  sheet  for  December  31,  1898,  contains 
the  following  entry: 

By  proi)erty  of  the  eom{)any,  viz,  the  petroleum  oil  business  of  Messrs.  M.  Samuel 
it  Co.  and  allied  Hrms  purchased  as  a  going  concern,  under  agreement  dated  November 
17,  1897,  consisting  of  steamships,  lands,  buildings,  wharves,  lighters,  storage  works, 
plant  and  installations,  concessions,  contracts,  etc.  Amount  of  consolidation  monev, 
payable  in  shares  of  the  company,  11,790,300. 

The  several  firms  merged  to  form  the  new  company  had  offices  in 
( 'hina,  Japan,  Madras,  Bombay,  Calcutta,  Penaug,  and  Singapore. 
At  that  time  tiie  principal  business  of  the  company  was  in  the  Orient. 
The  Samuel  fiuuily  were  the  prime  movers  in  the  new  organization 
and  they  are  still  prominent  in  its  management.  In  1900  the  capital 
stock  was  increased  £200,000  and  in  1902  preference  shares  were 
issued  to  the  amount  of  £1,000,000.  The  properties  consolidated 
included  certain  '' concessions  '  particularly  some  petroleum-produc- 
ing property  in  Borneo  held  by  a  subsidiary  company  known  as  the 
Nederlandsch-lndische  Industrie  en  Handel  Maatscliappij,  with  a 
nominal  capitalization  of  2,000,000  florins. 

New  AFiaLiATioxs. — The  operations  of  the  company  expanded 
rapidly.  New  steamers  were  added  to  the  fleet  each  j^ear,  together 
with  other  extensions  and  improvements.  The  dividends  paid  varied 
from  0  to  10  per  cent,  with  an  average  of  8.V  per  cent  during  the  first 
four  years  of  operations.  As  already  stated,  the  Shell  Co.  cooperated 
in  the  organization  of  the  Asiatic  Petroleum  Co.  (See  p.  12.)  About 
the  same  time  the  Petroleum-Produkte-Aktien-Gesellscnaf  t,  a  market- 
ing organization,  was  formed  by  the  Deutsche  Bank  interests  and  the 
Shell  Co.  The  balance  sheet  of  the  Shell  Co.  for  December  81 ,  1902, 
shows  that  it  held  stock  in  the  Petroleum-Produkte  Co.  amounting 
to  2,000,000  marks.  The  installation  of  equipment  for  the  distri- 
bution of  such  products  as  kerosene  and  gasoline  in  various  countries 
of  Europe  were  turned  over  to  the  new  company.  New  subsidiary 
distributing  companies  were  also  organized  in  l^^ngland,  Denmark. 


• 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  9 

and  the  Netherlands  about  this  time,  and  it  was  reported  that  the 
Shell  Co.  had  an  interest  in  the  Union  Petroleum  Co.,  with  head- 
quarters in  Philadelphia.  The  Shell  Co.  also  had  a  contract  with 
the  Gulf  Refining  Co.  for  the  purchase  of  refined  petroleum  products, 
which  were  sold  m  Europe  in  competition  with  similar  products  from 
Russia  and  Rumania,  the  petroleum  products  from  the  Dutch  East 
Indies  not  being  sold  in  Europe  apparently  before  1905.  In  1906 
the  Shell  Co.  withdrew  from  the  Petroleum-Produkte  Co.,  and  in 
1907  it  became  affiliated  with  the  Royal  Dutch  Co. 

FiNANCL\L  STATEMENTS. — The  gradual  growth  and  present  devel- 
opment of  the  Shell  Co.  is  well  illustrated  by  the  following  table: 

Table  6. — Statement  of  the  autftorized  capital  stock  of  the  Shell  Transport  &  Trading  Co 

(Ltd.),  1897-1921. 


Year. 


Capital 
authorized. 


1897 i  £  1 ,  800, 000 

1900 1  2,000,000 

1902 '  3,000,000 

1907 i  3,500,000 

1910 4,  .500, 000 

1911 i  5,000,000 


Year. 


1913. 
1918. 
1919. 
1920. 
1921. 


Capital 
authorized. 


£10,000,000 
15,000.000 
23, 000, 000 
23,000,000 
33,000,000 


The  above  table  shows  that  the  authorized  capital  stock  was  in- 
creased from  £1,800,000  in  1897  to  £33,000.000  in  1921.  On  De- 
cember 31,  1921,  £21,365,144  was  outstanding.  The  large  increases 
were  £5,000,000  in  1913,  £5,000,000  in  1918,  including  £3,041,172 
declared  as  a  stock  dividend,  and  £10,000,000  in  1921.  Certain  shares 
of  the  Shell  Co.  were  listed  on  the  New  York  Stock  Exchange  in  1919, 
and  these  shares  are  known  as  American  shares.  Each  American 
share  equals  two  British  £1  shares,  and  there  were  253,307  of  such 
shares  outstanding  on  June  30,  1922,  or  about  2^  per  cent  of  the  total 
outstanding  capital  stock.  In  September,  1922,  these  shares  were 
quoted  at  about  $40  per  share. 

The  balance  sheets  of  the  Shell  Co.  for  December  31,  1920  and  1921 , 
are  shown  in  the  following  table,  while  a  similar  statement  for  the 
five-year  period,  1917-1921,  is  given  in  Appendix  Table  4,  page  130. 

Tablet. — Balance  sheets  of  the  Shell  Transport  &    Tradinn  Co.  (Ltd.),  December  SI, 

1920  and  1921 . 


Item. 


1920 


1921 


ASSETS. 

Property  (shares,  etc.) |»  £16,588,461 

Debtors  and  loans 353, 146 

Dividends  due 4,435,331 

Investments I     13,812,051 

Cash I  122,713 


1  £20,256,603 

99,671 

4,722,739 

6,820,359 

2, 438, 771 


Total 35,311,702 


LIABILfTIES. 


Capital 

Reserves,  etc 

Creditors 

Unclaimed  dividends 

Preferred  dividends  accrued. 
Profit  balance 


34,338,143 


21,321,296 

5,000,000  I 

175,602  j 

19,762 

25,000 

8, 770, 042 


Total 1      35,311,702 


21,365,144 

5,000,000 

526, 163 

26,826 

25,000 

7,395,010 


34,338,143 


»  £=$4.8665. 


ii 


:\: 


10  FORKIGX   OWNERSHIP  IN   THE   PETROLEUM  INDUSTEY. 

The  Shell  Co.  is  a  holding  company,  consequently  the  assets  show 
no  investment  m  petroleum  lands,  refineries,  pipe  lines,  and  other 
tacilities.  1  he  company,  however,  owns  40  per  cent  of  the  stock 
in  various  subsidiaries,  which  own  and  operate  the  several  properties 
!'o  .11  n'rfrf  ■''  ,^^ff  ^subsidiary  corporations  increased  from  about 
abc^^t  £4  nno^nn^^  V^  £20,257,000  in  1921.  Marked  increases  of 
about  £4,000,000  each  year  were  made  m  1920  and  1921.     Durin<r 

nhmfr?r(?oTnnn  ^mP.'^^^  ^"'^^^  ^^^  outstanding  increased  from 
about  £6,998  000  in  1917  to  over  £21,365,000  in  1921.  Among  the 
assets  It  will  be  noted  that  there  is  an  item  of  -  investments,"  which 

fr^^f«  yXn '^'^^f '^^^^^  1917  to  £2,765,000  in  1918,  then  increased 
to  £lcJ,812,000,  and  in  1921   amounted  to  over  £6  820  000      This* 
amount  includes  bonds  of  the  British,  colonial,  and  foreign  Govern- 
ments,   municipalities,   railways,   etc.,   and  does  not  relate  to   the 
the  followin  amount  shown  for  1920,  £  13,812,000,  includes 

British  Treasury  bills x.?  07-  cnn 

Exchequer  bonds *'|'  ^;.:'?'  J^I; 

National  war  bonds " . .' ]'  ^^i^  ^ 

Victory  bonds,  4  percent '•  'fioi'VSI 

Colonial  governments ,^^'  ™ 

Foreign  Governments o^q^a 

Sundry  securities toUn, 

Oo,  .:>0U 

'^^^ 13,  812,  050 

The  above  is  probably  typical  of  the  character  of  the  securities 
catalogued  under  this  heading.     An  analysis  of  the  stock  holdings  of 

10117^?-^  ^^-^  Tu''^'^^?  subsidiaries  for  the  three-year  period 
1919-1921  IS  shown  in  the  following  table: 

Tablk  8.    'Stockholdings  of  the  Shell  Transport  d:  Trading  Co.  (Ltd.),  1919-1921. 


I  tern. 


FOREION. 


Bataafsche  Petroleum  Maatschaijplj 
Anglo-Saxon  Petroleum  Co. 

Asiatic  Petroleum  Co.  ( Ltd.) 

J^oci^td  Anonyme  Astra  Romana.  . !. 


Dec.  31- 


1919 


1920 


1921 


AMKRICAN. 


Roxana  Petroleum  Corporation 
Shell  Co.  of  California.... 


« }«,  000, 000 
«  3, 000.  (KX) 
«  1,400,000 
'  3, 082. 600 


1  84,  fKK),  000 
»  3. 000, 000 
■■' 1,400,000 
»  3,  ftS'J,  600 


'  S4, 000, 000 
»  3, 000, 000 
«  1,400,000 
» 3, 082. 600 


Il.4.'>9.900         II,  459. 900 


Shell  Union  Oil  CorFJoration l      ^'^'^^'^'  •^''^        '•^'  ^ ^■^' ^^ 

Asiatic  Petroleum  Co.  (Ltd.)  "(Dciawarc )'.".'  V.'.'.V.V.'.... \       *  ^'  ^^''  ^^ 

, *  19, 996 


»  Florins.  i  Pounds.  •  Lei. 

Normal  value  of  florin =40.2  cents;  pound  =-$4.8365;  loi- 19  oonis. 


*  Shares  of  no  par  value. 


The  princii)al  companies  tabulated  above  correspond  closelv  to 
hose  given  for  the  Royal  Dutch  Co.  (see  p.  6),  since  the  stock  in 
these  subsidiaries  is  held  in  the  proportion  of  60  per  cent  and  40  per 
cent  respectively.  From  the  information  available  the  values  of 
the  holdings  of  the  Shell  Co.  can  not  be  accurately  converted  to 
Jinghsh  currencv  and  thus  obtain  a  figure  comparable  with  that 
shown  in  the  balance  sheets  for  the  respective  years. 


J  ;  .« 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


11 


Income  accounts. — The  earnings  of  the  Shell  Co.  for  the  years 
1920  and  1921  are  shown  in  the  following  table,  while  the  income 
accounts  for  the  period  1917-1921  are  given  in  Appendix  Table  5, 
page  131. 

Table  ^.—Income  accounts,  Shell  Transport  &  Trading  Co.  {Ltd.),  1920  and  1921. 


Item. 


Dividends 

Tnterpst 

Totalincome 

Deduf'tions: 

Administrative  expense 
Expenses  on  new  issue. 

Total  deductions 

Net  income 


1920 


£7,182, 203 
486,439 


1921 


£5,143,632 
483,040 


7,668,fr42 


25, 535 
15,687 


41,222 


7,627,420 


5,626,672 


39, 250 
100,000 


139, 250 


5,487, 422 


As  already  stated,  this  company  owns  only  stocks  and  other 
securities  directly;  consequently^  its  income  consists  of  the  dividends 
accruing  to  the  holders  of  these  stocks,  while  the  expenses  include 
such  items  as  cost  of  administration  and  taxes.  The  income  was 
£7,627,420  in  1920  and  £5,487,422  in  1921,  a  decrease  of  about  28 
per  cent.  As  shown  by  Appendix  Table  5,  page  131,  the  income  in 
1917  was  about  £2,638,000,  which  increased  to  £2,853,000  in  1918, 
then  in  1919  to  £4,713,000.  This  continuous  increase  from  1917 
to  1920  and  the  slight  dechne  in  1921  is  indicative  of  the  unusual 
strength  and  stability  of  the  company. 

Dividends  paid. — The  rate  of  dividends  declared  by  the  Shell 
Co.  for  the  period  1909-1921  are  given  in  Table  5,  page  7.  They 
varied  from  a  minimum  of  20  per  cent  in  1911  to  a  maximum  of  35 
per  cent  for  every  year  of  the  period  1913-1920,  with  an  average  rate 
of  31  per  cent  for  the  13-year  period.  The  dividends  paid  during 
the  earlier  years  of  this  company,  1898-1901,  averaged  8^  per  cent. 
One  stock  dividend  of  60  per  cent,  amounting  to  £3,041,172,  was 
declared  in  1918.  The  preference  shares  arc  entitled  to  a  cumu- 
lative preferential  dividend  of  5  per  cent  per  annum. 

Voting  power. — The  preference  shares  have  no  voting  power 
unless  their  dividend  is  affected  or  in  arrears.  Every  common 
"fehare  has  one  vote  except  that  the  1,000,000  common  shares,  num- 
bering 701  to  1,000,700,  carry  five  votes  per  share  so  long  as  they 
are  held  by  the  original  allottees,  their  executors  or  administrators, 
the  trustees  of  their  wills,  or  any  person  deriving  title  from  them  by 
voluntary  transfer  or  bequest,  or  by  any  member  of  the  firm  of  M. 
Samuel  &  Co.,  as  from  time  to  time  constituted,  until  less  than  500,000 
of  such  shares  are  so  held,  when  they  will  have  one  vote  per  share. 

Section  3.  The  Royal  Dutch-Shell  group. 

Organization  and  development. — The  genesis  of  this  group  is 
found  in  the  two  companies  already  described  in  detail,  viz :  The  Royal 
Dutch  Co.  for  the  working  of  petroleum  wells  in  Netherlands  India, 
commonly  known  as  the  Royal  Dutch  Co.,  and  the  Shell  Transport  & 

35904—23 3 


I 


i 


m^- 


12 


forp:igx  ownership  in  the  petroleum  industry. 


Trading  Co.  (Ltd.) ,  which  is  ordinarily  known  as  the  Shell  Co.  The 
cooperation  between  these  two  companies  during  a  period  of  about 
20  years  has  resulted  in  the  development  of  a  completely  integrated 
business,  which  is  worid-wide  in  its  operations  and  which  has  been 
highly  profitable.  The  dividends  paid  by  these  two  cooperating 
concerns  on  the  capital  stock  issued  ranged  from  a  minimum  of  19 
to  a  maximum  of  73  per  cent  for  the  period  1902-1921,  with  an 
average  of  about  37  per  cent. 

The  most  important  change  in  the  organization  of  the  petroleum 
industry  in  the  Orient  occurred  when  the  interests  of  the  Shell  Co. 
and  of  the  Royal  Dutch  Co.  were  more  closely  affiliated  in  1907. 
The  plan  of  agreement  was  substantially  as  follows:  The  producing 
interests  of  both  companies — oil  fields,  refineries,  etc. — in  tlie  Dutch 
East  Indies  were  taken  over  by  a  new  company  called  the  Bataafsche 
Petroleum  Maatschappij — Batavian  Petroleum  Co. — with  a  capital 
stock  of  210,000,000  florins— about  $84,000,000— of  which  the  Royal 
Dutch  Co.  was  to  hold  60  per  cent  and  the  Shell  Co.  40  per  cent.  It 
was  provided  that  there  was  to  be  no  increase  of  capital  nor  admission 
of  otner  parties,  except  with  the  approval  of  four-fifths  of  the  board 
of  directors.  The  marketing  interests  of  these  two  concerns,  which 
previously  were  affiliated  through  their  mutual  participation  in  the 
Asiatic  Petroleum  Co.,  were  consolidated  in  a  new  distributing  con- 
cern called  the  Anglo-Saxon  Petroleum  Co.  (Ltd.) ,  with  a  capitaliza- 
tion of  £8,000,000— about  $38,932,000. 

Asiatic  Petroleum  Co. -This  company  was  organized  in  England 
in  1903,  with  an  authorized  capital  of  £600,000,  and  was  controlled 
equally  by  the  Royal  Dutch  Co.,  the  Shell  Transport  &  Trading  Co. 
(seep  8),  and  the  Society  Commerciale  etMiniere,  a  Rothschild  con- 
cern, organized  especially  for  the  eastern  petroleum  trade.  The  Roths- 
childs at  that  time  were  also  interested  in  the  Russian  oil  trade  and 
were  associated  with  the  Russian  interests  of  Nobel  Bros.  Co.  in  the 
marketing  of  oil.  The  peculiar  province  of  the  Asiatic  Petroleum  Co. 
in  this  triumvirate  of  interests  was  to  market  the  gasoline  produced 
in  the  Dutch  East  Indies  in  Europe.  . 

It  was  reported  that  provision  was  also  made  for  the  admission  of 
the  Rothschild  Russian  interests,  then  associated  with  them  in  the 
Asiatic  Petroleum  Co.,  thus  virtually  perpetuating  that  alliance.  In 
1907,  before  this  amalgamation  with  the  Shell  interests  was  consum- 
mated, the  Royal  Dutch  Co.,  in  order  to  establish  a  proper  proportion 
between  its  nominal  capitalization  and  the  real  value  of  its  assets, 
distributed  its  surplus  to  the  shareholders  by  allowing  them  a  stock 
dividend  of  200  per  cent. 

Policy  of  the  group. — The  general  purpose  and  policy  of  this 
group  in  respect  to  the  development  of  new  sources  of  crude  petroleum 
was  outlined  by  Sir  Marcus  Samuel,  chairman  of  the  Shell  Transport 
&  Trading  Co.,  speaking  at  the  annual  meeting  of  the  Shell  Transport 
&  Trading  Co.,  in  1913,  as  follows: 

The  business  is  world-wide,  and  we  are  determined  that  the  great  distributing  organ- 
ization whi(  h  we  have  created  shall  not  be  dependent  upon  any  one  field,  or  upon  any 
one  country,  or  upon  any  one  government.  We  shall  endeavor  to  acmiire  oil  terri- 
tories, so  essential  to  the  support  of  our  organization,  wherever  they  can  be  found. 

The  1920  annual  report  of  the  Royal  Dutch  Co.  stated: 

As  regards  competition,  the  fight  for  new  production  deserves  our  special  attention. 
This  struggle  became  especially  keen  when  the  significance  of  fuel  oil  became  generally 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


13 


manifest.  *  *  *  The  advantage  of  having  production  not  concentrated  in  only 
one  country,  but  scattered  all  over  the  whole  world,  so  that  it  may  be  distributed 
under  favorable  geographical  conditions,  has  been  clearly  proven.  It  needs  hardly 
be  mentioned  that  the  American  petroleum  companies  also  realized,  although  too 
late,  that  it  was  not  sufficient  to  have  a  large  production  in  their  own  country.  As 
regards  our  own  group  in  this  respect,  its  business  has  been  built  up  primarily  on  the 
principle  that  each  market  must  be  supplied  with  products  emanating  from  the 
fields  which  are  most  favorably  situated  geographically.  It  goes  without  saying  that 
we  are  now  reaping  the  benefits  resulting  from  this  advantageous  position. 

In  order,  however,  to  maintain  our  position  in  the  world  market  it  is  not  sufficient 
to  be  satisfied  with  the  advantages  already  obtained.  We  must  not  be  outstripped  in 
this  struggle  to  obtain  new  territory.  Our  interests  are  therefore  being  considerably 
extended;  our  geologists  are  everywhere  where  any  chance  of  success  exists. 

With  regard  to  the  assertion  that  American  companies  recognized 
too  late  the  advantage  of  having  oil  production  in  foreign  countries 
also,  it  may  be  noted  that  they  had  been  interested  therein  for  many 
years  previous  to  1920,  includmg  such  countries  as  Rumania,  Japan, 
Canada,  Trinidad,  and  Peru,  and  had  for  a  long  time  vainly  tried  to 
obtain  access  to  oil  fields  in  Galicia,  Burma,  and  the  Dutch  East 
Indies.  Sir  Marcus  Samuel  liimself  had  actively  opposed  the  entry 
of  the  Standard  Oil  interests  in  Burma  before  a  parliamentary 
conunittee  as  early  as  1905. 

Cooperating  and  affiliated  companies. — The  patient  and  per- 
sistent pursuit  of  this  policy  of  world-wide  expansion  by  the  Royal 
Dutch-Shell  group  has  resulted  in  the  acquisition  or  incorporation  of 
many  subsidiary  companies  in  all  quarters  of  the  globe  for  the  pro- 
ducing, transporting,  refining,  and  marketing  of  petroleum  and  its 
products.  The  subsidiaries  of  tliis  group  operating  in  the  United 
States  in  September,  1922,  are  given  in  Chart  1  (facing  p.  14).  A  fist 
of  the  subsidiary  and  affihated  companies  operating  outside  of 
the  United  States  taken  from  pubhshed  sources,  which  are  believed 
to  be  correct,  is  shown  in  Appendix,  Exhibit  1,  page  65.  The  com- 
panies listed  in  the  tabulation  are  those  operating  in  foreign  coun- 
tries, while  those  in  the  chart  were  incorporated  and  are  operating 
in  the  United  States.  The  chart  is  divided  into  two  branches,  the 
left  presenting  the  30  companies  which  are  controlled  by  the  Shell 
Union  Oil  Corporation,  wmle  the  20  companies  listed  in  the  right 
branch  are  controlled  by  the  Asiatic  Petroleum  Co.  (Delaware).  As 
indicated  by  the  name,  Shell-Union,  this  branch  lists  the  companies 
included  in  the  merger  of  the  American  subsidiaries  of  the  Royal 
Dutch-Shell  group  with  the  Union  Oil  Co.  (Delaware)  in  1921, 
while  the  Asiatic  Petroleum  Co.  (Delaware)  list  includes  the  residue 
of  the  companies  formerly  held  by  the  parent  group  in  the  United 
States. 

The  activities  of  several  of  the  foreign-controlled  companies  char- 
tered and  operating  in  the  United  States  are  known.  The  Asiatic 
Petroleum  Co.  (Delaware)  is  a  holding  company.  The  New  Orleans 
Refining  Co.  operates  a  refinery  in  the  vicinity  of  that  city,  using 
chiefly  Mexican  crude.  The  Simplex  Refining  Co.  simply  holds  some 
patents.  The  Gold,  Silver,  and  rearl  Shell  companies  own  tankers, 
a  separate  corporation  for  each  ship.  These  ships  are  built  and  regis- 
tered in  the  United  States,  but  they  can  not  be  operated  here  because 
of  the  Jones  Act,  nor  can  they  be  sold  because  of  the  registration. 
The  Asiatic  Petroleum  Co.  (New  York)  is  the  chief  American  pur- 
chasing agent  for  the  Royal  Dutch-Shell  group.  Most  of  the  other 
companies  were  simply  incorporated  in  the  various  States  enumer- 


^>*'*flHIBW*'WiBr^- 


Ht^'"^, 


'i'^'i 


14 


FOPiETGN    OWNERSHIP   TN   THE   PETROLEUM   INDUSTRY. 


a  ted  in  order  to  protect  the  name,  and  thev  transact  no  business  of 
importance.  It  is  believed  that  none  of  the  above  companies  own 
any  producing  property  in  the  United  States. 

Foreign  companies. — The  appendix  tabulation  (see  p.  65)  lists 
the  names  of  105  companies  regarding  which  only  fragmentary 
information  regarding  their  interrelations  and  the  activities  of  their 
units  is  available,  because  the  head  offices  of  the  two  controlling 
companies  are  located  in  Europe.  One  generalization  may  be  made, 
however,  and  that  is  the  Royal  Dutch-Shell  combination  does  not 
necessarily  own  or  control  all  of  the  companies  shown  in  the  tabula- 
tion. Among  the  most  important  companies  that  are  known  to  be 
owned  or  controlled  by  tne  Royal  Dutch-Shell  combination  the 
following  may  be  mentioned:  Anglo-Saxon  Co.,  Asiatic  Petroleum 
Co.,  Bataafscne  Petroleum  Co. — all  old  operating  and  holding  com- 
panies— Astra-Romana  (Rumania),  Schibaieff  Petroleum  Co.  (Rus- 
sia), Caribbean  Petroleum  Co.  (Venezuela)  (incorporated  in  New 
Jersey),  the  Mexican  Eagle  Co.  (Mexico),  and  the  Nederlandsch- 
Indische  Aardolie  Maatschappij.  The  latter  company  was  formed 
recently  in  conjunction  A\nth  the  Dutch  East  Indian  Government  to 
develop  the  Djambi  concession  in  Sumatra.  The  Standard  Oil  Co. 
(New  Jersev)  was  an  applicant  for  this  grant  and  was  strongly  sup- 
ported by  tlie  American  Government  in  several  communications  from 
the  State  Department.  The  Royal  Dutch-Shell  group  owns  only  50 
per  cent  of  the  above  concession.  In  the  case  of  the  Mexican  Eagle 
Co.  the  Royal  Dutch-Shell  interest  is  reported  to  be  about  20  per  cent 
of  the  capital  stock,  although  it  has  tne  actual  management  of  the 
operations  of  the  company.  The  major  portion  of  the  stock  owTier- 
ship  remains  with  the  Pearson  interests  (Lord  Cowdray),  from  whom 
the  minority  interest  was  purchased. 

Section  4.  Outline  of  activities. 

Crude  petroleum  proditction. — The  principal  producing  prop- 
erties of  the  Royal  Dutch-Shell  group  are  located  in  the  Dutch  East 
Indies.  Sarawak,  Egypt,  Russia,  and  Rumania,  in  the  Eastern 
Hemisphere;  while  its  oil  lands  in  North  and  South  America  are 
locatea  in  California,  Kansas,  Oklahoma,  Texas,  Louisiana,  and 
Arkansas,  and  in  Mexico,  Trinidad,  and  Venezuela. 

The  properties  controlled  in  Mexico  include  a  20  per  cent  interest 
in  the  Mexican  Eagle  Oil  Co.,  acquired  in  1919,  the  largest  producer 
in  that  country  having  an  aggregate  production  in  1921  of  38,665,000 
barrels.  The  total  quantity  of  crude  petroleum  controlled  by  the 
Royal  Dutch-Shell  group  for  the  years  1920  and  1921,  together  with 
the  location  of  the  production  by  countries,  is  given  in  the  following 
table,  while  a  similar  statement  for  the  period  1917-1921  is  shown 
in  Appendix  Table  6,  page  131. 

Table   10.— Petroleum  production  of  the   Royal  Dutch-Shell  ^oup,  in    barrels,   1920 

and  1921. 


Countries. 


United  States 

Dutch  East  Indies 

Bntisli  Borneo  (Sarawak) 

Egypt 

Rumania 


1920 


9,792,000 
16,400,000 
1,004,(X)0 
1,023,000 
2,358,000 


1921 


9,032,000 
16, 4s2. 000 
1,389,000 
1,245,000 
2,399,000 


Countries. 


Venezuela. 

Mexico 

Trinidad.. 


Total . 


1920 


516,000 
36,64\000 


67,741,000 


1921 


1,584,000 

51,528,000 

374,000 


84,033,000 


aarfY. 


Ch3rt5haw/ngBff///3fEd3r7d5utis/£//3f'yCDmpdn/E5offf7eRoyd/Duf^^ 

5f7E//5roupownei:/dn£/operdteii/nt/ieUnifE{f5fdfE5. 


/Jm  erica  n  Companies 

af 

fhe  RayalDutch-  Shell  Group 


Shell  Union  Oil 
Corporjfion 


Shell  Co.  of  California 


Wdshinqton  .Refining  Co. 


Ra  Xijna  Petroleum  Carp. 


CamarO/l  Ca. 


Ozark  Pipe  Line  Corp. 


Mata  dor  Fetroleum  Co 


Central  Petroleum  Co. 


Be  gam  ere  UilAGas  Co. 


Wiowam  Oil  Co. 


Wolverine  Oil  Co. 


fippleionClsBge  OH  Co. 


CarnegJE  Oil  Co . 


Coma  Oil  Co. 


Cap  Ian  Oil8<  Gas  Co. 


Fort  Pitt  Dii Co. 


Jfie  Galena  Ca. 


Hnox  Oil  Ca. 


LearferUi/A  Gas  Co. 


Leal  a  Oil  Co. 


L  uck  now  Oil  Ca. 


^.umbermansDIISiBas  Co. 


\MohawliDilCo. 


Manaqfam  Oil  Co. 


I  Niagara  Oil  Co. 


Pickwick  Oil  Co. 


Rofh  -PrguE-  Mai  re  Oil  Co. 


Sachem  OilCa. 


St  Lawrence  Oil  Co. 


Bfevens  Paint  Oil  Ca. 


\  Wgukeeha  O'l  Co. 


fisiaticPetraleum 
Co.  (pel),  Ltd. 


tietvOrleans  Refining  Ca. 


Simplex  Refininij  Co. 


•• 


Psiatic  Pet  Co.  (Panama)itm, 


Gald^hell Steamship  Ca. 


Pearl  Shell  5team5r<ipL ,:. 


SilyerShell  StBamshpfo 


Psia  tic  Pet  Co.  (N.  Y)  L  fd. 


ffsiaficPetCo. 
(Calif)  Inc. 


Psiatic  Pet  Co. 
(La.)  Inc. 


RsialicPatCo. 
(Md.)  Ltd. 


Psiatic  Pet  Co. 
CMe.)Ltd 


Psiatic  Pet  Co. 
(Mass.)  Ltd. 


Psiatic  Pet.  Co. 
(Ore.)  Ltd. 


Psiatic  Per.  Co. 
(N.J.)  Ltd. 


Rsiat.'cPef.Co. 
(Fa.)  Ltd. 


ffsiar/cP.e:  Co.      [ 
(R.I.)Lrd.  I 


Asiatic  Pet  Co. 

(Te.K.)Ltd. 


Psiaf/c.^efCo. 
{/a.)  Ltd.      


Psiatic  Pet  Co. 
(Wash.)  'Jd. 


PsiaticPef.Co.     j 
(Canaoai^'d.  j 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


15 


In  many  petroleum-producing  countries  the  quantities  are  expressed 
in  a  gravfmetric  scale  rather  than  the  volumetric  used  in  the  United 
States,  i.  e.,  in  tons  rather  than  barrels.  For  the  conversion  of 
tons — metric  or  long  tons — to  barrels,  the  various  multipliers  used  by 
the  Geological  Survey  were  adopted. 

These  tables  show  that  the  total  quantity  produced  increased  from 
36,745,000  barrels  in  1917  to  84,033,000  barrels  in  1921,  an  increase 
of  practically  129  per  cent.  No  production  was  reported  for  Russia 
during  the  period  1919-1921,  while  the  production  in  Mexico  for  1920 
and  1921  includes  the  entire  output  of  the  Mexican  Eagle  Co.,  of  which 
the  Royal  Dutch-Shell  group  has  the  management.  There  was  con- 
siderable variation  in  the  production  of  the  various  countries,  but  gen- 
erally the  tendency  was  upward,  so  that  the  position  of  the  company 
in  this  respect  was  greatly  strengthened  at  the  end  of  the  period  as 
compared  with  the  beginning. 

The  general  policy  in  respect  to  the  development  of  new  sources  of 
crude  petroleum  outlined  in  the  preceding  paragraph,  is  further  em- 
phasized in  the  following  extract  from  the  annual  report  of  the 
directors  of  the  Royal  Dutch  Co.  for  the  year  1920: 

We  must  not  be  outstripped  in  the  struggle  to  obtain  new  territory.  Our  interests 
are  therefore  being  considerably  extended;  our  geologists  are  everywhere  where  any 
chance  of  success  exists. 

This  report  of  the  directors  also  included  a  review  of  operations 
during  the  year  1920.  In  the  Dutch  East  Indies  an  interest  was 
obtained  in  the  Djambi  field  through  the  Nederlandsch-Indische 
Aardolie  Maatschappij,  organized  in  conjunction  with  the  Dutch 
East  Indian  Government,  while  production  increased  in  Sarawak 
and  Egypt  when  compared  with  1919.  In  Rumania  production 
increased  rapidly,  due  to  the  bringing  in  of  a  gusher,  but  operating 
conditions  were  very  unsatisfactory  owing  to  legal  restrictions. 
The  refining  and  lubricating  pjlants  were  operated  continuously, 
however,  and  transportation  facilities  were  improved.  In  Germany 
the  refining  plants  were  in  operation  and  exploration  and  develop- 
ment work  was  continued  in  Poland  (Galicia),  Yugoslavia,  Austria, 
France  and  its  colonial  possessions,  notably  those  in  northern  Africa. 
In  the  United  States  the  production  from  the  California  and  mid- 
continent  fields  combined  aggregated  9,792,000  barrels  in  1920  as 
compared  with  9,511,000  barrels  m  1919,  while  additional  producing 
properties  were  obtained  in  different  States  and  nonproductive  leases 
were  surrendered.  The  refining  facilities  were  increased  by  the 
completion  of  a  new  refinery  at  New  Orleans— New  Orleans  Refining 
Co. — while  transportation  and  storage  equipment  was  extended  by 
the  building  of  several  short  pipe  lines,  the  acquisition  of  500  tank 
cars,  and  the  construction  of  additional  tankage  facilities.  In 
Mexico,  although  general  conditions  were  unsatisfactory,  everything 
possible  was  done  to  develop  the  business  of  the  Mexican  Eagle  and 
the  Corona  companies.  The  lands  held  were  appreciably  increased 
and  various  questions  with  regard  to  the  validity  of  concessions  to 
petroleum  territories  were  adjusted.  Several  new  wells  were  brought 
m  on  reserved  territory,  a  new  tank  farm  was  secured,  the  existing 
pipe  lines  were  enlarged,  while  the  work  in  connection  with  increas- 
ing the  refining  capacity  to  130,000  barrels  daily  was  in  process  of 
execution   and  shipping  facilities  were  being  extended.     In  Vene- 


16  FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


, 


zuela  the  production  increased  so  rapidly  that  new  equipnient  had 
to  be  provided  to  facilitate  the  prompt  transportation  of  both  the 
crude  petroleum  and  the  refined  products  obtained  therefrom. 

Proportion  of  world  production. — The  world  production,  to- 
gether with  the  quantity  and  proportion  controlled  by  the  Royal 
Dutch-Shell  group  by  countries  for  1920  and  1921,  is  given  m  the 
following  table,  while  a  similar  statement  for  the  five-year  period 
1917-1921  is  shown  in  Appendix  Table  7,  page  132. 

Table  U.— Petroleum  production  for  the  world,  by  countries,  and  the  proportion  con- 
trolled by  Royal  Dutch-Shell  group,  in  barrels,  1920  arid  1921. 


1920 


Country. 


United  States 

Dutch  East  indies 

British  Borneo  (Sarawak). 

Egypt 

Rumania 

Venezuela 

Mexico 

Trinidad 

Russia 


Total. 


Subtotal 

Persia 

India 

Poland  (Galicia) 

Japan  and  Formosa . 

Argentina 

Franco 

(Jermaiiy 

Canada 

Italy 

Algeria 

England 

Peru 


442,929,000 

17,529,0(X) 

1,020,000 

1,016,000 

7,435,000 

457,  (XK) 

163,540,000 

2.os;i,ooo 

25,430,000 


Royal 
Dutch- 
Shell. 


Per  cent. 


9,792,000 

16,400,000 

1,004,000 

1,0-23,000 

2,358,000 

516,000 

36,648,000 


2.2 
93. 6 
98.4 

100.0 
31.7 

100.0 
22.4 


1921 


Total. 


Royal 
Dutch- 
Shell. 


472,183,IK)0 

16,958,000 

1,411,000 

1,255,(K)0 

8,368,000 

1,433,000 

193,398,000 

2,3.54,000 

29,150,000 


9,0:}2,000 

16,482,000 

1,389,000 

1,245,000 

2,399,000 

1,. 584, 000 

51,528,000 

374,000 


Percent. 


1.9 
97.2 
98.4 

100.0 
•28.7 

100.0 
26.6 
15.9 


061,439,000 

12,Z30,000 

8,375,000 

5,607,000 

2,140,000 

1.666,000 

.389,000 

212,000 

196,000  ^ 

-35,000 

4,000 

3,000 

2,817,000 


67,741,000 


10.2 


P" 


726,510,000 

16,673,000 

8,  (MX),  000 

5,167,000 

2,447,000 

1,747,000 

392,000 

200.000 

190,000 

.34,000 

3,000 

3,  (XX) 

3,699,000 


84,033,000 


11.6 


Total 695,113,000  I  67,741,000 


9.7       765,065,000  .  84,033,000 


11.0 


It  will  be  noted  that  the  production  of  the  Royal  Dutch-Shell 
group  in  certain  countries  sometimes  exceeds  the  reported  total  pro- 
duction, particularly  in  1920.  The  quantities  given  for  the  Royal 
Dutch-Shell  group  were  taken  directly  from  their  annual  reports, 
while  the  total  production  for  the  years  1917-1921  was  taken  from 
reports  of  the  United  States  Geological  Survey. 

The  table  shows  that  the  Royal  Dutch-Shell  interests  controlled 
about  11  per  cent  of  the  world  production  in  1921.  It  is  apparent 
at  once  that  there  are  several  important  petroleum-producing 
countries  where  this  group  does  not  control  any  producing  property, 
notably,  Persia,  India,  and  several  countries  in  wSouth  America.  In 
Mesopotamia,  however,  it  has  a  25  per  cent  interest  in  the  Turkish 
Petroleum  Co.,  which  claims  the  concession  for  these  fields,  and  thus 
claims  a  substantial  interest  in  any  crude  petroleum  wliich  is  pro- 
duced there  (see  p.  50).  ,.  . 

The  United  States  Government  has  been  active  in  attempting  to 
secure  an  interest  for  American  companies  in  the  Mesopotamia  oil 
fields.  The  Washington  Herald  published  the  following  under  date 
of  October  19,  1922: 

London.  October  18.— The  Anglo-American  oil  a^eement  regarding  the  Mesopo- 
tamian  oil  fields  has  not  yet  taken  its  final  form,  but  it  has  been  agreed  to  in  principle. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


17 


The  exact  share  that  America  will  receive  has  jiot  yet  been  decided  ^^^^  b"*  ^^f  ^^b- 
ablv  will  be  between  20  and  30  per  cent,  ^^hich  will  be  surrendered  by  the  fehell  and 
\nglo-Pprsian  interests.  American  cooperation  is  much  desired  because  capital  is 
needed  in  the  development  of  the  fields  and  money  is  not  plentiful  here. 

If  the  production  in  the  United  States  be  excluded  the  Royal 
Dutch-Shell  group  had  almost  33  per  cent  of  the  production  in  all 
other  countries,  including  practically  all  of  the  production  m  Ven- 
ezuela, Egypt,  and  British  Borneo,  97  per  cent  in  the  Dutch  iiast 
Indies,  29  per  cent  in  Rumania,  over  26  per  cent  in  Mexico,  while 
the  proportion  obtained  in  Trinidad  was  about  16  per  cent.  Thus 
the  group  controls  a  verv  substantial  proportion  of  the  crude  petro- 
leum production  of  the  world,  located  geographically  m  all  quarters 
of  the  globe,  and  it  is  thus  advantageously  situated  when  the  trans- 
portation and  distribution  of  its  crude  petroleum  and  refined  products 

to  the  world  markets  are  considered.  i  ta  ^  i,  ci,  ii 

Petroleum  refineries.— The  refineries  of  the  Royal  Dutch-bhell 
interests  include  5  in  the  United  States,  with  a  daily  capacity  of 
65  000  barrels;  4  in  Mexico,  with  a  daily  capacity  of  155,000  barrels; 
1  in  Curacao;  1  in  Venezuela;  1  at  Suez,  with  others  in  Europe  and 
the  Orient,  together  with  gasoline  compression  plants,  storage  facili- 
ties, and  other  equipment  necessary  for  the  proper  handling  of  the 
refilled  products.     The  details  for  the  plants  in  Europe  and  the 

Orient  are  not  available.  tt  •     j    o     4.       ^i  • 

Transportation  and  marketing. — In  the  United  btates  tins 
group  controls  170  miles  of  trunk  pipe  lines  in  California  and  582 
miles  from  the  mid-continent  fields  to  Woodriver,  III.  In  Mexico 
its  trunk  pipe  lines  aggregate  about  240  miles  in  length,  with  a  daily 
capacity  of  approximately^  150,000  barrels.  No  details  are  available 
regarding  the  pipe-line  facilities  which  run  from  the  several  producing 
properties  in  the  Dutch  East  Indies  to  the  refineries  on  the  coast. 
There  is  a  government  pipe  line  from  the  Rumanian  oil  fields  to  the 

Black  Sea.  .....  ,         ,    , 

The  real  strength  of  this  combination  as  a  distributing  and  market- 
ing organization,  aside  from  its  widely  distributed  sources  of  supply, 
consists  in  its  ownership  or  control  of  about  1,144,000  tons  of  tankers, 
barges,  and  tugboats,  together  with  terminal  facilities,  wharves, 
warehouses,  and  oil-bunkering  stations.  Its  oil-bunkering  stations 
are  located  in  all  quarters  of  the  globe,  including  the  United  States, 
Canada,  the  West  Indies,  Mexico,  Central  and  South  America,  South 
Africa,  Egypt,  Turkey,  India,  China,  Japan,  Australasia,  and  the 
important  countries  in  western  Europe.  The  furnishing  of  bunkering 
oil  is  one  of  the  most  important  activities  of  this  group,  and  recentlv 
it  has  made  a  rapid  extension  of  such  marketing  facilities  in  South 
America  and  the  West  Indies. 

Section  5.  Location  of  Royal  Dutch  production. 

On  Map  I  (facing  p.  18)  the  location  of  the  crude  petroleum  produc- 
tion of  the  Royal  Dutch-Shell  group,  American,  and  other  producers  is 
indicated.  The  area  of  the  circle  for  a  particular  country  is  based 
upon  its  proportion  of  the  1921  world  production.  In  the  case  of  the 
l^ited  States  five  circles  are  shown,  representing  the  oil  fields  in  the 
eastern  part  of  the  country,  the  mid-continent.  Gulf,  Rocky  Mountain, 
and  California  oil  fields,  respectively.  The  production  of  the  Royal 
Dutch-Shell  group  is  indicated  on  the  map  by  solid  black,  that  of  the 


18 


FOREIGN   OWNERSHIP   IN   THE  PETROLEUM   INDUSTRY. 


United  States  producers  by  stipple,  and  all  other  producers  by  cross- 
hatching. 

The  proportion  for  American  subsidiaries  in  the  Royal  Dutch-Shell 
group  are  also  shown  in  Table  11,  page  16.  The  proportion  of  the 
total  production  of  the  Royal  Dutcn-Shell  interests  in  certain  coun- 
tries varies  from  year  to  year.  For  example,  its  proportion  of  the 
United  States  total  increased  from  about  2  per  cent  in  1921  to  3i 

ger  cent  for  the  fii*st  six  months  of  1922,  wliile  in  Mexico  the  Royal 
>utch-Shell  production  decreased  from  26  per  cent  of  the  total  in 
1921  to  13  per  cent  for  the  fii-st  half  of  1922. 

In  South  America  the  Royal  Dutch-Shell  interests  have  developed 
the  production  in  Venezuela,  while  a  subsidiary  of  the  Imperial  Oil 
Co.  (Ltd.),  of  Canada,  operates  in  Peru.  This  latter  company  is  a 
subsidiary  of  the  Standard  Oil  Co.  (New  Jersey),  but  the  crude 
petroleum  exported  from  Peru  is  practically  all  shipped  to  Canada. 

The  Royal  Dutch-Shell  group  controls  the  production  in  Egypt, 
the  Dutch  East  Indies,  and  British  Borneo.  In  India  the  crude 
petroleum  is  produced  by  British  companies.  (See  p.  43.)  In 
rersia  the  present  production  is  mostly  produced  by  a  British  com- 
pany, the  Anglo-Persian  Oil  Co.  (Ltd.).  American  companies  are 
endeavoring  to  secure  concessions  in  Persia  and  Mesopotamia. 
(See  p.  50.) 

The  production  of  the  Galician  oil  fields,  which  are  now  in  Poland, 
was  largely  owned  by  Austrian  and  German  capitalists  prior  to  the 
World  vVar.  Since  the  war  French  and  Swiss  capitalists  have 
invested  largely  in  oil  companies  operating  in  Poland.     (See  p.  56.) 

The  most  important  proven  petroleum  areas  in  Russia  are  the 
Baku,  Grozu}',  and  Ural  fields.  Some  production  was  also  obtained 
from  Maikop  aftd  Ferghana.  In  1914  there  were  three  important 
foreign  prociucing  groups  having  large  crude-petroleum  production 
in  Russia,  viz,  (1)  the  Russian  General  Oil  Corporation,  a  British 
holding  company  controlling  about  20  subsidiary  and  affiliated  pro- 
ducing companies;  (2)  the  Royal  Dutch-Shell  group,  with  8  producing 
companies;  and  (3)  Nobel  Bros.,  controlling  5  important  producing 
companies.      (See  Appendix  Table  8,  p.  133.) 

A  French  writer  states  that  in  1914  the  Russian  General  Oil 
Corporation  produced  about  21.5  per  cent  of  the  total  Russian  pro- 
duction; the  Royal  Dutch-Shell  group.  16.4  per  cent;  and  the  Nobel 
group,  13.5  per  cent.  There  were  4  other  British  companies  finan- 
cially interested  in  about  14  smaller  producing  companies,  which  in 
1914  produced  4.2  per  cent  of  the  total  Russian  production.^ 

Thirty-eight  companies  produced  98  per  cent  oi  the  crude-petroleum 
production  of  Rumania  in  1921  and  three  companies  produced  about 
70  per  cent  of  that  total.  These  three  companies  were  the  Astra 
Romana,  a  subsidiary  of  the  Royal  Dutch-Shell  group,  which  had 
about  29  per  cent;  the  Romaiia-Americana,  a  subsidiary  of  the 
Standard  Oil  Co.  (New  Jei'sey),  with  nearly  22  per  cent;  and  the 
Steaua  Romana,  which  before  the  World  War  was  controlled  by  the 
Deutsche  Bank,  but  is  now  owned  by  Rumanian,  French,  and  English 
interests,  which  produced  about  20  per  cent  of  the  total  Rumanian 
production.^ 

»  La  Liiltc  Pour  le  Potrole  ot  la  Russie,  pp.  121  and  165-172. 

^  See  United  States  Bureau  of  Forcipn  and  Doraostic  Commerce  Tn»de  Information  Bulletin  No.  45. 


---~""^'  -^'t   I  •til. 


Map  /. 

CRUDE  PETROLEUM  PRODUCTION  AND  PROPORTIONS  OF  ROYAL.  DUTCH-SHELL  GROUP  AND  OF  AMERICAN  PRODUCERS 

BASED   ON  1921  OUTPUT 


6(4 


160* 


180* 


160* 


i*0' 


120' 


100* 


eo' 


LEGEND 

ffoy<?f  Dufc-h-6he//  Gf^up 
I::;-  :|  ffmsir/Ccjn  Producers 


♦0* 


20' 


20* 


♦0' 


60* 


90" 


100 


120" 


MO' 


¥i 


m 


35904—23.     (Face  p.  18.) 


fi^i^'*imm:s^^^>'^m>mmm^'^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


19 


The  January  29,  1923,  issue  of  Revista  de  Hacienda  (official  organ 
of  the  Department  of  Finance  and  Public  Credit  of  Mexico)  sum- 
marized the  investments  in  the  petroleum  industry  of  Mexico  as 
follows : 

American  companies,  006,043,239  pesos,  or  58.2  per  cent  of  the  total  investments 
in  the  Mexican  petroleum  industry;  liritish  companies,  344,776,199  pesos,  or  33.1  per 
cent;  Dutch,  71,197,308  pesos,  or  6.8  per  cent;  Mexican,  11,582,405  pesos,  or  1.1  per 
cent;  and  all  others  as  0,933,283  pesos,  or  0.8  per  cent. 

A  detailed  statement  of  the  capital  invested  in  oil  lands,  oil  wells, 
pipe  lines,  refineries,  and  storage  distributing  facilities  is  given  in 
Appendix  Table  32  (p.  152). 

Section  6.  Oil-bunkering  stations. 

The  economic  and  physical  advantages  accruing  from  the  use  of 
fuel  oil  as  compared  with  coal  was  cjuickly  realized  by  the  principal 
maritime  nations,  consequently  an  increasing  proportion  of  the  new 
ships  built  both  for  naval  and *^commercial  purposes  w^ere  oil  burners, 
while  many  originally  designed  to  burn  coal  were  converted  from 
coal  to  oil  firing.  The  rapid  expansion  in  the  number  of  oil-burning 
ships  necessitated  the  construction  and  installation  of  oil-bunkering 
facilities  at  the  various  maritime  centers  thi'oughout  the  world. 
These  terminal  facilities  required  docks  large  enough  to  accommodate 
the  largest  ships,  and  adequate  storage  facilities  and  equipment  for 
handling  fuel  oil.  In  addition  lighterage  facilities,  such  as  barges, 
etc.,  were  frequently  available  so  that  vessels  might  be  refueled  at 
the  loading  or  discharging  berths,  thus  doing  away  with  tedious 
delays,  as  the  cargp  could  be  removed  and  the  fuel  supply  replenished 
at  the  same  time. 

Several  foreign  companies  were  among  the  first  to  appreciate  the 
advantages  inherent  in  the  use  of  fuel  oil  and  the  members  of  the 
Royal  Dutch-Shell  group  were  among  the  pioneers  in  this  branch  of 
petrolemn  marketing. 

At  the  present  time  a  British  steamer  starting  from  New  York  City 
making  a  trip  around  the  world  and  calling  at  every  important  port 
in  Europe,  along  the  Mediterranean,  in  India,  the  East  Indies,  China, 
Japan,  Australia,  New  Zealand,  and  the  west  coast  of  North  America, 
and  then  returning  to  New  York  City  through  the  Panama  Canal, 
would  find  oil-bunkering  stations  operated  by  the  Royal  Dutch- 
Shell  group  or  the  Anglo-Persian  Oil  Co.  at  every  important  port  of 
call.  Oil-bunkering  facilities  operated  by  an  American  company 
would  be  available  to  an  American  steamer  on  a  similar  voyage  at 
the  principal  ports  of  western  Europe  and  the  Mediterranean,  but 
between  the  Suez  Canal  and  Singapore  in  the  Malay  Peninsula  fuel 
oil  would  have  to  be  purchased  from  foreign  companies,  while  fuel 
oil  could  be  secured  from  American  companies  at  only  a  few  ports  in 
the  Orient,  Australia,  or  New  Zealand. 

The  oil-bunkering  stations  of  the  Royal  Dutch-Shell  group,  of  the 
Anglo-Persian  Oil  Co.,  and  of  12  large  x\merican  companies  are 
shown  on  Map  II,  opposite  page  20,  while  Appendix  Table  9,  page  134, 
gives  fuller  details  regarding  each  company,  including  so  far  as  avail- 
able the  capacities  of  the  fuel-oil  stations.  The  American  com- 
panies are  further  classified  on  the  map  by  the  use  of  one  symbol  for 
companies  belonging  to  the  Standard  Oil  group  and  a  different 
symbol  for  so-called  independent  concerns.     As  ah-eady  indicated, 


l|«iiS«*#3%*nsS.te¥*::>:j»V'^^<^'S  -' 


iimnwi 


20 


FORKFCIN   OWNERSHIP  IN   THE  PETROLEUM   INDUSTRY. 


the  fuel-oil  stations  of  the  Royal  Dutch-Shell  group  are  located  in 
all  parts  of  the  world,  while  American  companies  operate  fuel-oil 
stations  in  the  important  ports  of  North  and  South  America,  and  in 
a  large  number  of  ports  of  western  Europe,  along  the  Mediterranean, 
and  at  certain  ports  on  the  eastern  coast  of  Asia. 

The  Standard  companies  have  an  aggregate  bunkering  capacity 
of  about  8,500,000  barrels  in  America,  Europe,  and  alon^  the  Asiatic 
coast.  The  Standard  Oil  Co.  (New  Jersey)  operates  fuel-oil  stations 
with  about  6,000,000  barrels  capacity,  the  Standard  Oil  Co.  (Cali- 
fornia) has  about  1,500,000  barrels  capacity,  and  the  Standard  Oil 
Co.  of  New  York  owns  stations  with  a  capacity  of  about  850,000 
barrels.  The  so-called  independent  companies  together  control 
storage  capacities  of  about  20,000,000  barrels,  and  approximately 
one-half  of  this  aggregate  capacity  is  operated  by  the  Doheny  interests 
(Pan  American)  principally  in  the  United  States,  Mexico,  and  Brazil. 
The  Gulf  Oil  Corporation  controls  a  capacity  of  about  2,300,000 
barrels,  the  Texas  Co.  2,700,000  barrels,  the  Sinclair  interests  have 
have  about  2,900,000  barrels,  while  the  Union  Oil  Co.  of  California 
and  the  Associated  Oil  Co.  each  control  over  1,000,000  barrels 
capacity. 

The  Royal  Dutch-Shell  group  has  about  1,250,000  barrels  capacity 
at  10  stations  in  the  United  States  and  its  possessions,  while  it  has 
about  110  additional  stations  all  around  the  globe,  for  which  the 
present  capacity  is  not  available. 


ML 


w-j-    -.^Mmr:  m:mK.-^  ■■^■i''^^^'IKm'^WISI^^<>'W?^..-  '^''f-^ 


Map  I. 


LOCATION  OF  OIL 


BUNKERING  STATIONS  OF  ROYAL  DUTCH-SHELL  GROUP.  STANDARD  GROUP  AND  OTHER  LARGE 

COMPANIES 


35004—23.    (Fftoep.aa) 


'  *fe»aiw*  lr-aKap»»f*»»*5»'' 


^nmyfimm-- 


*■;  *'■*;:■ 


^-«WMibM»lMt*»¥****«^-'li*«f 


?-l 


Chapter  III. 

CONSOLIDATION  OF  ROYAL  DUTCHSHELL  INTERESTS  WITH 

UNION  OIL  CO.  (DELAWARE). 

Section  1.  Union  Oil  Co.  (Delaware). 

Preliminary  proceedings.— During  the  World  War  certain  pro- 
moters having  in  view  the  development  of  petrolemn  properties  on 
the  f'acific  coast  succeeded  in  interesting  eastern  capitalists  in 
petroleum-producing  companies  in  California.  As  a  result  of  these 
negotiations  the  United  Western  Consolidated  Oil  Co.  was  incor- 
porateti  in  1917.  This  company  controlled  some  petroleum  acreage 
in  the  Midway,  Casmalia,  and  Montebello  fields  in  California,  together 
with  some  leases  m  Wyoming.  Later  the  Western  Union  Oil  Co., 
controlling  production  in  the  Santa  Maria  field  in  California,  was  also 
acquired  by  the  same  interests,  together  with  some  other  minor  pro- 
ducing companies,  such  as  the  Dunlop  Oil  Co.  The  Commonwealth 
Petroleum  Corporation  was  organized  in  1918  as  a  holding  company 
by  the  eastern  capitalists  already  mentioned  and  acquired  the  stocks 
of  the  operating  companies.  Later  acquisitions  included  the  pur- 
chase of  the  Columbia  Oil  Producing  Co.  and  its  subsidiary,  the 
1  uente  Oil  Co.,  and  thus  production  in  the  Whittier-Fullerton  field 
and  a  refinery  at  Chino  were  acQuired  by  this  eastern  syndicate, 
these  last  two  companies  were  w^ell-established  concerns,  the  former 
being  orgamzed  in  1900  and  the  latter  in  1892. 

Union  Oil  Co.  of  California.— The  most  important  expansion 
made  by  these  eastern  interests  was  in  the  acquisition  of  stock  owner- 
ship in  the  Union  of  California,  and  as  particular  prominence  has  been 
attached  to  this  transaction,  the  following  circumstances  are  of 
interest:  About  1912  an  option  on  the  stock  of  the  Union  of  California 
was  obtained  by  the  interests  controlling  the  General  Petroleum  Co. 
(Capt.  John  Barneson)  and  in  the  year  preceding  the  World  W^ar  this 
option  was  transferred  to  Andrew  Weir  (now  Lord  Inverforth) 
Under  this  agreement  27,793  shares  of  the  Union  of  California  stock 
were  issued  to  the  British  Union  Oil  Co.,  which  was  organized  in 
Jingland  on  April  16,  1915,  but  the  exigencies  of  the  war  prevented 
the  completion  of  this  contract.  The  eastern  syndicate  above  men- 
tioned purchased  these  shares  held  by  the  British  Union  Oil  Co.  in 
1919,  and  in  a  cu-cular  issued  by  the  Union  of  California  on  August 
12,  1919,  regarding  subscription  rights  to  64,285  shares  of  new^  stock 
about  to  be  issued,  the  same  interests  are  referred  to  as  follows: 

A  group  of  responsible  linanciers  have  entered  into  an  underwriting  agreement 
with  your  company.     *    *    *    whereby    *    *    *    said  underwriters  offer  to  pur- 
chase  irom  any  and  all  stockholders  any  and  all  of  the  certificates  of  rights  which 
may  be  tendered  to  said  underwriters  at  any  time  on  or  before  September  20    1919 
on  the  basis  of  $60  per  share  right.     (See  Exhibit  2.  p.  70.) 

A  large  block  of  stock  was  doubtless  acquired  at  this  time  and 
immediately  afterwards— as  of  October  1,  1919— the  eastern  syndi- 
cate, Union  Oil  Co.  (Delaware)  held  108,135  shares  and  the  right  to 
acquire  16,115  additional  shares.     On  February  14,  1920,  the  num- 

21 


'^g^s:«' 


22 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


ber  of  shares  held  was  113,731  and  by  December,  1920,  the  number 
had  increased  to  130,869  shares,  remaining  at  this  figure  until  June 
30,  1922. 

The  Union  Oil  Co.  (Delaware)  was  incorporated  August  14,  1919, 
and  acquired  for  cash  the  stock  held  by  the  above  syndicate  in  the 
Union  of  California  and  in  the  Columbia  Oil  Producing  Co.,  while 
stock  was  issued  for  the  control  of  the  Commonwealth  Petroleum 
Corporation.  In  July,  1920,  the  control  of  the  Central  Petroleum 
Co.,  which  had  properties  in  Oklahoma,  was  acquired  from  the 
Texas  Co.  Additional  producing  properties  were  acquired  directly 
in  West  Virginia  and  OKlahoma,  wnile  several  subsidiary  companies, 
such  as  the  Eddystonc  Oil  Corporation  and  the  National  Exploration 
Co.,  were  incorporated  to  conduct  operations  and  exploration  work. 
The  Union  of  Delaware  was  simply  a  holding  corporation  and  the 
physical  properties  were  managed  and  operations  carried  on  by  the 
several  subsidiaries  mentioned  above. 

Financial  statements. — The  balance  sheets  for  this  corporation 
as  of  December  31,  1920  and  1921,  and  June  30,  1922,  are  shown  in 
the  following  table: 

Table  12. — Balance  sheets  of  the  Union  Oil  Co.  {Delauarc),  December  31,  19 W  and 

1921,  and  June  SO,  192 J. 


Item. 


ASSKTS. 

Investments: 

Cninmon wealth  Petroleum  Corporation. 

Columbia  Oil  Producing  Co 

United  Western  Consolidated  Oil  Co 

Eddystone  Oil  Corporation 

National  Evploration  Co 

C-cntral  Petroleum  Co 

Union  Oil  Co.  of  California 

Shell  Union  Oil  Corporation 


Total  in-  e-«(ments 


Tankers 

Oil  laiids  and  leases  (Ohio) 

Furniture  and  fixtures 

Current  assets 

Due  from  afTiliatcd  companies. 
Deferred  items 


Total . 


Dec.  31,  1920.   ,    Dec.  31,  1921. 


$12,203,199.61 

5,371,687.60 

10.304.01 

2,566,535.57 


11,344,408.80 
20, 440, 625.  42 


.51,936.761.01 


J12, 


2, 

n, 

20, 


226,973.21 
372,080.71 
13, 3.56. 48 
.566, 535.  57 
700, 342.  00 
35.5, 8.50. 70 
440. 625.  42 


52,675,764.09 


4,040,000.00  I      3,893,769.65 


6, 854. 09 
6.316.6.5.5.45 
620,  (M7.  79 
5,6.50.00  I 


12,393.93 

1.675,283.00 

4, 623,  .586.  94 

166,750.49 


62. 92.5, 968. 34  !    63, 047,  ,'>18. 10 


LIABTI.ITIKS, 

Capital  stock :  46, 483, 983. 40 

Stock  purchase  oblipations: 

Cvcntral  Petroleum  Co.  preferred  stock 6. 000, 000. 00 

Columbia  Oil  Producing  Co 1,,  2.54, 779. 57 

Current  liabilities ■  .5, 501 ,  666.  81 

Due  to  airiliated  companies 2, 221 ,  oas.  26 

Deferred  credit i  294, 37.5. 00 

Surplus 1.170,1.5.5.30 


June  30,  1922. 


$115,450.70 


44,049,692.89 


44, 165, 143.  59 


3,906,269.65 

431.. 50 

19, 190.  84 

462. 472. 07 


8.S,  629.  00 


48,637,136.65 


47,193,011.20        47, 236, 0.>4. 00 


5, 982, 900. 00 
7.54, 839.  57 

4, 953, 263.  89 

1,242,319.22 
226,  269.  73 

2,694,944  49  1 


2,  .501. 981. 03 
23,611.98 


•1,124,510.  .36 


Total 62,925.968.34 


63, 0*7, 548. 10  i      48, 637, 136. 65 


» Deficit. 

The  above  table  shows  the  stocks  held  in  the  various  subsidiaries, 
including  the  Union  Oil  Co.  of  California,  in  1920  and  1921;  in  1922, 
however,  these  holdings  were  transferred  to  the  Shell  Union  Oil 
Corporation  (recently  organized)  and  the  stock  of  the  latter  com- 
pany (2,240,000  shares)  was  substituted  therefor,  while  some  mis- 
cellaneous shares  (171  preferred,  3,231  common)  were  still  retained 


u, 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


23 


in  the  Central  Petroleum  Co.  The  physical  properties  sho^vTi  in 
June,  1922,  included  the  tankers  in  process  of  construction  and  some 
oil  lands  and  leases  in  Ohio.  The  current  liabilities  aggregated 
the  very  substantial  sum  of  $2,500,000,  and  to  liquidate  this  in- 
debtedness an  offering  of  subscription  rights  to  139,000  shares  of 
Shell-Union  stock  was  made  on  August  17,  1922,  to  stockholders 
of  the  Union  of  Delaware  at  $12  per  share  at  the  rate  of  1  share  of 
common  stock  in  the  Shell-Union  for  each  10  shares  in  the  Union  of 
Delaware.  (See  Exhibit  3,  p.  71.)  This  offering  was  promptly 
oversubscribed,  and  155,000  shares  were  sold.  The  Shell-Union 
stock  was  quoted  on  the  New  York  curb  market  on  October  19,  1922, 
at  $12.1 2^  per  share. 

Section  2.  Merger  with  Royal  Dutch-Shell  interests. 

Preliminary  procedure. — Early  in  1921  the  directors  of  the 
Union  Oil  Co.  (Delaware),  which  was  practically  a  producing  com- 
pany, realizing,  it  is  said,  the  necessity  of  the  development  of  a 
thoroughly  integrated  petroleum  company  wdth  refineries,  pipe 
lines,  distributing  and  marketing  facilities,  entered  into  negotiations 
with  the  Royal  Dutch-Shell  interests,  and  a  plan  was  evolved  which 
enabled  the  Union  Oil  Co.  (Delaware),  without  the  raising  of  new 
capital,  to  share  in  the  advantages  accruing  from  the  utilization  of 
additional  refineries  and  other  facilities.  As  a  preliminary  step  a 
careful  examination  and  valuation  of  the  physical  properties  and 
facilities  of  both  groups  in  the  United  States,  as  they  existed  May  31, 
1921,  was  made  by  disinterested  parties,  and  it  was  later  agreed  that, 
if  these  properties  were  vested  in  one  corporation,  the  interest  of  the 
Royal  Dutch-Shell  and  Union  of  Delaware  groups  would  be  72  and 
28  per  cent,  respectively.  An  agreement  w^as  signed  October  19, 
1921,  by  the  Union  of  Delaware  and  the  Anglo-Saxon  Petroleum  Co. 
(Ltd.),  a  Royal  Dutch-Shell  subsidiary,  and  approved  at  a  special 
meeting  of  the  shareholders  of  the-  Union  of  Delaware  November  17, 

1921.  (See  Exhibits  4  and  5,  pp.  73  and  78.)  Under  this  agreement 
the  principal  American  interests  of  the  Royal  Dutch-Shell  group, 
together  with  most  of  the  properties  of  the  Union  of  Delaware,  were 
merged  into  a  new  company — the  Shell  Union  Oil  Corporation. 

Shell  Union  Oil  Corporation. — The  Shell  Union  Oil  Corporation 
is  a  holding  company.     It  was  incorporated  in  Delaware  February  8, 

1922,  and  issued  8,000,000  shares  of  common  stock  in  payment  for 
the  property  and  assets  transferred  to  it  by  the  Union  of  Delaware, 
on  the  one  nand,  and  the  American  subsidiaries  of  the  Royal  Dutch- 
Shell  group  on  the  other.  The  Union  of  Delaware  received  2,240,000 
shares  of  Shell-Union  stock,  a  cash  payment  of  $386,220.70,  and  the 
Shell-Union  assumed  $777,777.77  of  Union  Oil  Co.  liabilities.  ^  The 
Royal  Dutch-Shell  interests  received  5,760,000  shares  of  the  Shell- 
Union  stock,  "which  was  allotted  as  follows : 

Shares. 

Roval  Dutch  Co 3, 152,  770 

Shell  Transport  &  Trading  Co 2, 101,  847 

Dundee  Corporation 505, 383 

Total 5,  760,  000 

The  immediate  representative  of  the  Royal  Dutch-Shell  interests 
in  the  preliminary  transactions  was  the  Anglo-Saxon  Petroleum  Co. 


1;     ' 


'  •vWHtair-.a  it),  'r 


'I' 


24  FORKIOX    OWNERSHIP   TX   THK   PKTROLEUM   INDUSTKV. 

(Ltd.),  one  of  the  principal  subsidiaries  of  the  group  The  Dundee 
Corporation  is  not  a  member  of  the  Royal  Dutch-Shell  group.     (See 

Financial  details  of  the  merger.— The  preliminary  processes  in 

this  consolidation,  including  the  ^''l"ati°'i,f  ''^^^''091  «nd\he 
Mftv  31  1921  the  signing  of  the  contract  October  19,  1921,  and  tfte 
details  of  the  approval  of  the  same  by  the  stockholders  of  the  Union 
Oil  Co.  (Delaware)  have  been  outlined  in  the  Pre'^P'!'"!  Pa'"'\fi;*P'it- 
The  consolidation  was  consummated  on  January  2,  1922,  although 
the  new  holding  companv  (Shell  Union  Oil  Corporation)  was  not  in- 
corporated until  February  8,  1922,  and  some  adjustments  in  the 
original  valuations  wore  made  as  late  as  February  10,  1922. 

fhe  consolidated  balance  sheet  of  the  Shell  Union  Oil  Corporatio  1, 
dated  January  2,  1922,  is  shown  in  the'  following  table,  while  a  similar 
statement  showing  more  detail  is  given  in  Appendix  Table  10  (p.  139). 

Table  yi.—Bahmr  «heH  of  the  Shdl  Unim,  Oil  r,>r,,oratioii  .Innunrii  i,  mi. 

ASSETS. 

Properties,   oil  lands,   leases,   pipe  lines,   re- 

fineries  (hook  value).,.., --,----• *  ^- '  Sr*  ?t?' 4? 

T.esa  reserves  for  depreciation  and  depletion. . .       4o,44(),  /41.4/ 

,,.      ,         ,     „^,  $153,119,799.02 

I* ixeti  assets,  net /■■,■";;*• ;^"*i  n f    n„i; 

Investments,  inc hiding  stock  of    the  Union   Oil  To.   of    (all-      ^^  ^^^  ^^^^  ^^ 

fornia '       ' 

Current  assets:  $  18,  CG5,  430.  93 

I  asn .J    ey\-\     rOX    "V^ 

Accounts  receivahle -*'  -j^'  \-l\-  -^i     . 

Notes  receivahle .-- «  20«  867  73 

Inventories  at  cost  or  market 8,JU8,»b/. /^ 

M.  .  1             *         fa  -  -  -       '-^0, 289, 101. 89 

Total  current  assets ^^g'  ^^^  39 

Prepaid  expenses - "    ' 

^  ,  ,         ,  217,585,720.17 

Total  assets __       ' 

M.ABII.ITIES. 

Current  liahilities:  .       . 

Accounts  payahle ^\^  r*  ;'  f^l'  % 

Notes  payable -':{{'  ^'l',  \' 

Sundry  accruals J^ '  -  "y     ■  .^ 

Federal  taxes 230,  OOP.  UU 

Total  current  liahilities J,  092,  348.  32 

Purchase  money  obligations -'     "'   '■  ^ 

Reserves  against  option  of  purchase ^.  :J^^'  ^^- 

Reserve  for  bad  and  doubtful  items on  nnn'  noo'  00 

Preferred  stock,  0  per  cent  cumulative - , -  20, 000,  OOU.  uu 

Common  stock.  8.000.000  shares  of  no  nar  value  representing  net 

assets,  after  deducting  the  preferred  stock 18I,«1A  »^i- -^o 

Total  liabilities 217,585.720.17 

The  fixed  assets,  inchuling  oil-land  leases,  pipe  lines  f^^J^^^^^J\f 
transferred  to  the  new  corporation,  had  a  hook  value  of  SU  8,o()b,o4U, 
and  when  the  aggregate  fund  for  depreciation  and  denletion  was 
deducted  the  net  value  of  these  properties  amounted  to  about 
$153,119,800.  The  respective  holdings  of  the  several  companies  in- 
cluded in  the  combination  are  shown  in  detail  in  Appendix  lable  10, 
page  139. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


26 


It  will  also  be  noted  that  tlie  old  Royal  Dutch-Shell  companies, 
including  the  Shell  of  California  and  the  Roxana  Petroleum  Corpora- 
tion, contributed  $135,198,900,  or  approximately  88  per  cent  of  the 
total  book  value  of  the  fixed  assets  in  the  new  corporation,  while  the 
Union  of  Delaware  companies  contributed  only  12  per  cent.  In  the 
case  of  the  investments,  however,  the  old  companies  put  in  about 
$2,000,000,  which  was  the  investment  of  the  Roxana  Co.  in  the 
Comar  Oil  Co.,  while  the  Union  of  Delaware  companies  contributed 
about  $32,000,000,  including  principally  the  holdings  in  the  Union  of 
California,  with  a  book  value  of  $20,441,000,  and  the  equity  in  the 
Central  Petroleum  Co.,  aggregating  $11,356,000. 

The  cash  contributed  by  the  various  amalgamating  companies  was 
comparatively  small.  The  important  item  of  $18,000,000  represents 
the  sale  of  200,000  shares  of  6  per  cent  preferred  stock,  which  was 
underwritten  by  Lee,  Higginson  &  Co.,  and  issued  on  or  about  August 
18,  1922.  (See  Exhibit  6,  p.  80.)  This  stock  was  issued  to  secure 
working  capital  for  the  proper  development  of  the  consolidated 
properties.  The  Shell  Union  Oil  Corporation,  being  a  holding  com- 
pany, simply  holds  the  stock  of  the  several  American  subsidiaries 
which  own  and  operate  the  various  properties.  The  values  of  the 
capital  stock  acquired  from  each  company,  as  shown  on  the  exhibit, 
aggregates  $183,913,000.  The  deduction  of  $2,000,000  was  then  made, 
representing  the  discount  on  the  sale  of  $20,000,000  preferred  stock, 
leaving  the  book  value  of  the  common  stock  as  $181,913,000.  Against 
this  amount  8,000,000  shares  of  common  stock  of  no  par  value  was 
issued,  giving  a  nominal  value  of  $22.75  per  share.  Both  classes  of 
this  Shell-Union  stock  are  now  quoted  on  the  market,  the  common  on 
October  19,  1922,  at  $12. 12^  and  the  preferred  at  $94  per  share, 
respectively. 

A  balance  sheet  of  the  Shell  Union  Oil  Corporation  on  June  30, 
1922,  is  shown  in  the  following  table: 

Table  14. — Balance  sheet  of  the  Shell  Union  Oil  Corporation,  June  30,  1922, 


Item. 


ASSETS. 

Investments: 

Stock  of  subsidiary  and  affiliated  companies — 

Matador  Petroleum  Co.,  common 

Ozark  Pipe  Line  Corporation- 
Preferred  

Common 

Roxana  Petroleum  Corporation- 
Preferred  

Common 

Shell  Co.  of  California,  common 

Rights  under  agreement  between  Union  Oil  Co.  and 
the  Texas  Co.  respecting  the  purchase  of  stock  of 

Central  Petroleum  Co $11 ,  250, 000. 00 

Less  reserve  against  option  to  purchase  preferred  stock. .      6, 000, 000. 00 


Shares. 


4,419 

85,161 

184,000 

36,903 
400,000 
788, 081 


Value. 


Stock  of  Union  Oil  Co.  of  California . 


Current  assets: 

Cash 

Accoimts  receivable 

Prepaid  expenses » . 

Due  from  Roxana  Petroleum  Corporation 

Deferred  items,  net 


Total. 


130, 869 


$441,900.00 

8,516,100.00 
18,391,308.73 

3,690,300.00 
42,759,406.56 
82, 314, 951.  40 


5,250,000.00 


161,363,966.69 
20, 440, 625. 42 


181,804,592.11 

16, 014, 165. 35 

36,000.00 

1,853.57 

7, 216, 253. 21 

189,713.09 


205,262,577.33 


35904—23- 


M-S^r. 


■»  .->-»*«-,.  -mmamhuK-  w  'ommnAtUittuMitiiikJ^'' 


I,  %ri;*^:*'?^--'«*iw«*»" 


%      *1?^>T«' 


tT,  f 


26 


FOREIGN   OWNERSHIP  TN   THE   PETROLEUM   INDUSTRY. 


Table  14.— fiakncc  ^htti  of  the  Shell  Union  Oil  Corporation,  June  JO,  1922— Contd. 


Item. 


LUBILITIES. 


Preferred  stock,  scries  A 

Common  stock 

AccouDts  payable 

Due  to  Shell  Co.  of  California ; 

Reserve  for  dividends  on  preferred  stock,  series  A 

Profit  and  loss  surplus,  six  months  ended  June  30, 1922. 


Total. 


Shares. 


Value. 


200,000 
8,000,000 


$20,000,000.00 

181, 811, 168.86 

34, 062. 47 

42,783.58 

160, 000. 00 

3,224,^2.32 

205,262,577.33 


At  this  time  the  company  had  been  operating  for  some  months 
and  the  assets  as  tabulated  show  the  number  of  shares  held  in  the 
various  subsidiaries.  The  properties  of  the  numerous  Union  of 
Delaware  subsidiaries  shown  in  Appendix  Table  10,  page  139,  were 
distributed  geographically  to  the  Shell  of  California  or  the  Roxana 
Petroleum  Corporation,  operating,  respectively,  in  California  and  in 
the  mid-continent  oil  field.  Some  of  the  former  companies  are  m 
process  of  dissolution.  The  balance  sheets  of  the  principal  prede- 
cessor companies  at  the  end  of  1920  and  1921  and  other  American 
Royal  Dutch-Shell  subsidiaries  for  June  30,  1922,  are  shown  m 
.\  ppendix  Tables  1 1-29,  pages  143-1 50.  A  recapitulation  of  the  fixed 
assets  of  the  predecessor  companies  as  of  December  31,  1921,  and  of 
the  Shell  Union  Oil  Corporation  as  of  January  2  and  June  30,  1922, 
is  given  in  the  following  table: 

Table  15.— Gross  assets  of  predecessor  companies  and  of  the  Shell  Union  Oil  Corporation 
as  of  December  Si,  1921,  and  of  January  2  and  June  30,  1922. 


Item. 


Predecessor  companies,  Dec.  31,  1921 

Shell  Union  Oil  Corporation,  Jan.  2,  1922.. 
Shell  Union  Oil  Corporation,  June  30,  1922 


Gross  assets. 


Depreciation. 


$226,691,189.80 
198, 566, 540.  49 
224,498,737.95 


$39,648,771.73 
45,446,741.47 
43,811,257.00 


Net  assets. 


$187,042,418.07 
1.53,119,799.02 
180,687,480.96 


This  table  shows  that  the  gross  book  value  of  the  fixed  properties 
of  the  predecessor  companies  aggregated  $226,691,000  in  1921,  while 
the  net  book  value  was  $187,042,000  on  the  same  date.  Appendix 
Table  10,  page  139,  gives  the  net  value  of  the  fixed  assets  in  the  merger 
on  January  2,  1922,  as  $153,120,000,  so  that  the  fixed  property  not 
in  the  new  combination  amounted  to  about  $33,923,000,  which  rep- 
resented the  book  values  attached  to  certain  oil-producing  properties 
in  West  Virginia  and  elsewhere,  together  with  some  adjustments  in 
the  depreciation  and  depletion  accounts  and  also  the  investment  in 
the  ships  now  transferred  to  the  Asiatic  Petroleum  Co.  (Delaware). 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


27 


Section  3.  Properties  of  Shell  Union  Oil  Corporation. 

Acreage  of  oil  lands. — The  acreage  of  oil  lands  held  by  the  Shell 
Union  Oil  Corporation  on  June  30,  1922,  and  also  the  land  holdings 
of  the  predecessor  companies  on  December  31,  1921,  are  shown  in  the 


following  table 


Table  16. —  Total  and  proven  acreage  of  predecessor  companies,  December  dl,  1921, 
the  Shell  Union  Oil  Corporation,  June  30,  1922,  (kssified  by  States. 


and 


Company. 


Total  acreage, 
1921. 


Shell  Co.  of  California 

Columbia  Oil  Producing  Co 

United     Western    Consolidated     Oil 

Co 

Western  Union  Oil  Co 

National  Exploration  Co 

Eddystone  Oil  Corporation 

Roxana  Petroleum  Corporation 

Comar  Oil  Co 

Central  Petroleum  Co.  (option) 

Total 


27,420 
5,580 

375 

11,502 
35,745 
26,213 
87,517 
41, 874 
27,000 


263,226 


Proven  acre- 
age, 1921. 


2,028 
1,632 

100 

1,100 

3,059 

7,034 

18,687 

720 

12,775 


47,135 


Total  acreage, 
Jime  30, 1922. 


24,682 

5,580 

375 

11,502 

7,903 

7,518 

115,750 

40,638 

27.000 


Proven  acre- 
age, June  30, 
1922. 


2,362 
1,642 

100 

1,100 


35 

15,283 

1,043 

12, 775 


240.948 


34,340 


Company. 


Total  acreage  by  States,  June  30, 1922. 


CaU- 
fomia. 


Shell  Co.  of  California |  24,682 

Columbia  Oil  Producing  Co i  5, 580 

United  Western  Consolidated  Oil  Co I  375 

Western  Union  Oa  Co j  11,502 

National  Exploration  Co 7,903 

Eddystone  Oil  Corporation 7, 518 

Roxana  Petroleum  Corporation 

Comar  Oil  Co 

Central  Petroleum  Co.  (option) 


Total. 


57,560 


Okla- 
homa. 


63,666 
40,558 
27,000 


131,224 


Texas. 


Louisi- 
ana. 


Arkan- 
sas. 


Kansas. 


39,606  I      10,325 


903 


1,250 
80 


39,606        10,325 


903 


1,330 


This  table  also  ^ives  the  proven  acreage  for  both  dates  and  like- 
wise the  distribution  of  the  land  holdings  by  States  for  June  30, 
1922.  The  Shell  of  California,  the  Roxana,  and  Comar  companies 
were  all  subsidiaries  of  the  Royal  Dutch-Shell  group  in  1921,  while 
the  other  companies  were  all  controlled  by  the  Union  of  Delaware. 
The  land  holdings  of  the  former  group  were  located  at  that  time  in 
California,  Kansas,  Oklahoma,  Texas,  Arkansas,  and  Louisiana, 
while  the  latter  concerns  had  lands  and  leases  in  all  of  the  above 
States  excepting  Kansas  and  Arkansas,  and  in  addition  thereto  held 
properties  in  West  Virginia  aggregating  about  14,500  acres. 

The  total  holdings  controlled  by  tlie  predecessor  companies  in 
1921  aggregated  over  263,000  acres,  of  which  47,000  acres  were 
proven  territory.  At  the  time  of  the  consolidation  certain  lands 
and  other  properties  were  excluded  from  the  new  corporation,  while 
the  constituent  companies  had  varied  their  holdings  by  certain 
additions  and  surrenders  so  that  the  total  acreage  held  on  June  30, 
1922,  aggregated  about  240,950  acres,  of  which  over  34,300  was 
proven  area.     Over  131,000  acres  were  located  in  Oklahoma,  57,600 


I 


3>* 


'«?.,' v... 


■.*-«*-aii^-*«  i*V:  i*^- 


28 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


in  California,  39,600  in  Texas,  and  10,300  in  Louisiana,  while  th^ 
acreage  held  in  Kansas  and  Arkansas  was  comparatively  unimportant 
so  far  as  the  quantity  is  concerned.  The  Shell  Co.  of  California  owns 
about  58,000  acres  of  oil  lands  in  California.  The  Roxana  Corpora- 
tion owned  115,800  acres  in  the  mid-continent  field  and  owns  50  per' 
cent  of  the  reported  holdings  (40,700  acres)  of  the  Comar  Oil  Co., 
retaining,  however,  the  management  of  the  company,  while  it  has 
only  an  option  on  the  properties  of  the  Central  Petroleum  Co.,  which 
expires  in  1923. 

The  Wall  Street  Journal  of  November  2,  1922,  on  page  6,  stated: 

Shell  Union  Oil  ('orporation  will  retire  on  May  1,  192.3.  at  par  the  $6,000,000  5  per 
cent  cumulative  i)referred  stock  of  the  Oentml  Petroleum  (^o.,  which  is  held  by  the 
liankers  Trust  (-o.  under  a  10-year  votino;  trust. 

It  appears,  therefore,  that  the  Shell  Union  Oil  Corporation  intends 
to  exercise  its  option  to  purchase  on  May  1,  1923,  the  entire  out- 
standing preferred  stock  and  66 §  per  cent  of  the  outstanding  common 
stock  of  the  Central  Petroleum  Co.* 

The  1921  annual  report  of  the  Koyal  Dutch  Co.,  in  discussing 
production  in  the  mid-continent  field,  states: 

The  Roxana  Petroleum  (Corporation  has  considerably  strengthened  its  jKJsition  in 
the  mid-continent  by  entering  into  two  agreements  for  the  joint  exploitation  of  fields 
which  were  already  partly  productive  and  partly  still  being  explored. 

They  succeeded  in  appreciably  increasing  the  production  of  the  former  and  in 
])roving  j)aying  production  in  the  latter. 

The  Union  Oil  Co.  of  California,  in  which  tlie  Shell  Union  Corpora- 
tion owns  over  26  per  cent  of  the  outstanding  stock,  controlled 
266,500  acres  of  oil  lands  in  California,  Texas,  Wyoming,  and  Colo- 
rado on  June  30,  1922.  of  which  slightly  over  11,200  acres  were  proven 
territory. 

On  June  30,  1922,  the  Sliell  of  California  had  557  wells,  the  Roxana 
Petroleum  Corporation  556,  the  Comar  Oil  Co.  14,  and  the  Central 
Petroleum  Co.  987  wells,  making  altogether  2,114  wells.  The  oil 
lands  and  leases  acquired  during  the  year  ending  June  30,  1922, 
were:  Shell  Co.,  5,080  acres;  Roxana  Co.,  21,600  acres;  the  Comar  Co., 
3,200  acres;  while  the  Union  of  California  had  acquired  8,900  acres 
and  surrendered  11,000  acres  during  the  same  period. 

Crude  petroleum  production. — As  shown  by  the  following 
table,  the  production  of  the  predecessor  companies,  including  the 
Comar  and  Central  Petroleum  Cos.,  was  13,640,000  barrels  in  1921, 
while  the  production  of  the  companies  included  in  the  new  consolida- 
tion aggregated  9,043,000  barrels  during  the  first  six  months  of  1922. 
Of  this  latter  quantity  4,617,000  barrels  were  produced  b}^  the  com- 
panies operating  in  California,  and  4,426,000  barrels  in  the  mid- 
continent  fields.  The  total  production  for  1922  was  17,543,362 
barrels,  of  which  11,188,489  barrels  was  produced  in  California  and 
6,354,873  barrels  in  the  mid-continent  oil  field. 


'  Under  date  of  Dec.  11, 1922,  Adrian  Corbott  wrote  the  commission  in  reference  to  the  above,  as  follows : 
"There  is  no  plan  so  far  as  1  am  aware  of  to  retire  the  issued  and  outstanding  stock  of  Central  Petroleum 
Co.  Shell- Union  Oil  Corporation  held  an  option  to  acquire  all  of  the  issued  and  outstanding  preferred 
stock  of  Central  Petroleum  Co.  and  two-thirds  of  its  issued  and  outstanding  common  stock  for  the  sum 
of  $6,<)0().»)00.  This  option  Shell-Union  Oil  Corporation  has  elected  to  exercise.  Such  election  having 
been  made,  Shell-Union  oil  Corporation  is  obligated  to  purchase  and  paj-  for  such  preferred  and  common 
stock  on  Mav  1 .  192.-^.  " 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  iJSiDUSTRt. 


29 


Table  17. — Crude  petroleum  production  in  barrels,  of  companies  now  controlled  by  the 
Shell  Union  Oil  Corporation,  1921  and  first  half  of  1922. 


Company. 


1921 


Shell  Co.  of  California 4, 924, 1 .54 

Columbia  Oil  Prodticing  Co .  |  1 ,  348, 859 
United    Western    Consoli-  i 

datedCo !  92,364 

Western  Union  Co \  623, 1 14 

Commonwealth    Oil    Cor-  I 

poration '  1,356 

National  Exploration  Co j  504, 165 


June  30, 
1922.1 


3,426,720 
660,392 

52,778 
220,006 


Company. 


Eddystone  Oil  Corporation 

Roxana  Petroleum  Cor- 
poration  

Comar  Oil  Co 

Central  Petroleum  Co.  (op- 
tion)  

Total 


1921 


129,943 

3,898.030 
209,955 

1,908,000 


.Tune  30, 
1922.1 


256,905 

2, 855, 849 
570,249 

«],000,000 


13,639,940  I  9,042,899 


>  First  6  months. 


«  Estimated. 


In  this  compilation  the  quantity  produced  by  the  Central  Petro- 
leum Co.  was  estimated  at  1,000,000  barrels,  or  about  50  per  cent 
of  the  production  reported  for  the  preceding  year.  The  total  pro- 
duction in  the  United  States  for  the  first  six  months  of  1922  was 
reported  as  267,521,000  barrels.^  The  Royal  Dutch-Shell  group 
produced  9,043,000  barrels  during  the  same  period,  or  3.4  per  cent- 
Thus  it  would  appear  that  the  latter  group  is  increasing  its  propor- 
tion of  the  production  in  the  United  States,  as  the  proportion  in 
the  United  ^States  in  1920  was  about  3  per  cent.  In  tJiis  computa- 
tion the  operations  of  the  Union  of  California  are  not  considered, 
as  the  Royal  Dutch-Shell  group  does  not  control  this  company. 
This  company  produced  9,796,000  barrels  in  1921  and  5,889,000 
barrels  during  the  first  half  of  1922. 

In  June,  according  to  their  reports,  the  average  daily  production 
of  the  Shell  of  California  and  its  subsidiaries  was  39,400  barrels, 
while  the  Roxana,  Comar,  and  Central  aggregated  25,800  barrels, 
giving  a  total  of  over  65,000  barrels  daily.  The  Union  of  Cali- 
fornia had  a  daily  production  of  about  33,000  barrels.  The  Wall 
Street  Journal  of  October  14,  1922,  states: 

W.  H.  Allen,  president  of  the  Shell  Union  Oil  Corporation,  says  dailv  average 
j^ross  i)roduction  of  oil  by  its  subsidiaries  in  September  was  7(),476  barrels,  inrludinji 
13,000  barrels  of  shut-in  production  at  (^oalinga.  ( -alif.  Daily  avera^^e  gross  production 
in  January,  1922,  was  37,289  barrels.  Central  Petroleum  (Jo.'s  daily  average  produc- 
tion in  September  of  4,410  barrels  is  not  included.  Most  of  the  increase  in  pro- 
duction has  come  from  Signal  Hill  and  Santa  Fe  Springs  fields,  (Jalif.  *  *  *  Pro- 
duction from  new  completions  wathin  the  lam  10  davs  brijigs  total  output  above 
80,000  barrels  gross  daily. 

Petroleum  refineries  and  pipe  lines.— The  Shell  of  California 
owns  and  operates  three  refineries  and  a  topping  plant  in  that  State 
with  a  daily  combined  capacity  of  35,800  barrels.  The  refinery  at 
Martinez,  in  the  vicinity  of  San  Francisco,  is  a  thoroughly  integrated 
plant  with  a  daily  capacity  of  30,000  barrels.  The  smaller  plants 
with  their  capacities  are:  Coalinga,  2,000;  Chino,  1,300;  Olinda 
(topping),  2,500  barrels  daily.  In  addition  the  company  has  four 
gasoline  absorption  plants  located  in  the  oil  fields  of  southern  Cali- 
fornia which  will  handle  10,000,000  cubic  feet  of  gas  daily. 

The  company  owns  a  trunk  pipe  line  extending  from  the  Coalinga 
fields  to  Martinez,  a  distance  of  170  miles,  also  a  short  line  extending 
from  the  Puente  fields  to  the  refinery  at  Chino  south  of  the  Tehachapi 
range,  together  with  gathering  lines'^  storage  tanks  with  a  capacity  of 

s  American  Petroleum  Institute  bulletin.    The  preliminary  estimiite  of  the  U.  S,  Ceologieal  ?urvev  for 
1922  was  i>jl,197,(XW  barrols.    Xet  imports  for  1922  were  about  120,000,01)0  barrels. 


■ 


■   -.    .*mut'^'«ttn^-T 


■■^  >.. ^/^  i^J?^ 


ft' 


m- 


30 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


5,000,000  barrels,  139  tank  cars,  and  690  tank  wagons,  trucks,  and 
automobiles. 

The  Koxana  Petroleum  Corporation  owns  and  operates  one  refinery 
at  Woodriver,  111.,  with  a  daily  capacity  of  15,000  barrels.  This 
plant  is  completely  integrated,  manufacturing  all  petroleum  products. 
In  addition  it  has  three  compression  plants  in  the  Oklahoma  oil 
fields,  with  a  daily  productive  capacity  of  222  barrels  of  casing-h^ad 

gasoline. 

This  company  also  operates  the  pipe  line  owned  by  the  Ozark  l^ipe 
Line  Corporation.  Its  trunk  pipe  line,  582  miles  in  length,  connects 
the  oil  fields  in  Oklahoma  witli  the  refinery  at  Woodiiver,  111.  This 
trunk  pipe  line,  commencing  at  Waurika,  Okla.,  is  a  6-inch  line  to 
Cushing,  Okla.,  156  miles  distant,  and  then  a  10-inch  pipe  line  to 
Woodriver,  111.,  426  miles  distant.  The  capacity  of  this  latter  pipe 
line  is  about  25,000  barrels  daily  while  the  6-inch  pipe  lines  average 
about  10,000  barrels.  In  addition  to  this  trunk  pipe  line,  there  are 
24  miles  of  smaller  pipe  lines  in  the  vicinity  of  Cushing,  Okla.,  besides 
gathering  lines,  storage  tanks  with  a  capacity  of  3,000,000  barrels, 
loading  racks,  and  other  facilities. 

The  Central  Petroleum  Co.  owns  six  compression  plants  and  one 
absorption  plant  in  Oklahoma,  but  there  are  no  refining  facilities 
controlled  by  this  company. 

Marketing  equipment. — In  the  domestic  market  the  Shell  of 
California  distributes  its  products  in  all  the  Pacific  Coast  States,  also 
in  Nevada  and  Arizona,  while  shipments  to  noncontiguous  territory 
of  the  United  States  are  made  to  Alaska  and  Hawaii,  and  export 
trade  is  canied  on  with  British  Columbia,  Chile,  and  other  countries. 
In  its  domestic  territoiy  the  company  maintains  77  service  stations 
distributed  throughout  California,  Washington,  and  Oregon,  which 
deliver  the  petroleum  products  directly  to  the  consumer,  and  the 
company  has  an  investment  of  about  $200,000  in  foreign  ports, 
consisting  chiefly  of  storage  tanks  and  other  terminal  facilities. 

The  marketing  equipment  of  the  Roxana  Co.  includes  1,003  tank 
cars  owned,  373  tank  cars  rented,  also  168  motor  vehicles  owned  and 
19  others  in  which  the  company  owns  only  a  50  per  cent  interest. 

Section  4.  Stock  ownership  of  Shell  Union  and  subsidiaries. 

Shell  Union  Oil  Corporation. — ^As  already  stated  the  Royal 
Dutch-Shell  gioup  received  72  per  cent  and  the  Union  Oil  Co.  (Dela- 
ware) 28  per  cent  of  the  stock  of  the  Shell  Unioin  Oil  Corporation. 
The  present  status  of  the  stock  ownership  in  this  corporation,  its  sub- 
sidiaries and  coordinate  companies,  is  shown  in  the  following  table: 

Table  18.— ^^area  of  common  stock  outstanding  of  the  Shell  Union  Oil  Corporation  and 
subsidiaries,   Union  Oil  Co.  (Delaware),  and  tJie  Union  Oil  Co.  of  California. 


Company. 


.Shell  Union  Oil  Corporation.... 

Shell  Co.  of  California 

Roxana  Petroleum  Corporation 
Ozark  Pipe  Line  Corporation... 

Matador  Petroleum  Co 

Union  Oil  Co.  (Delaware^ 

Union  Oil  Co.  of  California 


Total. 


Ueld  by- 
Shell 
Union. 


8,000,000 

788,086 

400,000 

184,000 

5,916 

1,389,310 
500,000 


5,760,000 

788,066 

400,000 

184,000 

5,916 


130,869 


Union  Oil 
Co.  (Dela- 
ware). 


Union  Oil 
associates. 


2,240,000 


273,8.j3 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  31 

As  shown  by  the  table,  the  Shell  Union  Oil  Corporation  issued 
8  000,000  shares  of  common  stock  with  no  par  value  for  the  prm- 
cipal  American  subsidiaries  of  the  Royal  Dutch-Shell  group  and  of 
the  Union  Oil  Co  (Delaware).  The  Roval  Dutch-Shell  group  received 
5,760,000  shares  and  the  Union  of  Delaware  2,240,000  shares  of  this 
stock.     The  former  block  of  stock  was  further  allotted  as  follows: 

Shares. 
Roval  Dutch  Oo iVmll^ 

Shell  Co ^'^3:1^ 

Dundee  Corporation : ^'^'  ^^"^ 

The  Royal  Dutch  and  Shell  companies'  holdings  are  60  per  cent 
and  40  per  cent,  respectively,  while  the  Dundee  Corporation,  a 
British  company  incorporated  in  New  York,  formerly  controlled 
some  petroleum-producing  property  in  the  mid-continent  fields. 
About  1910  this  property  was  transferred  to  the  Royal  Dutch-Shell 
interests  and  ultimately  stock  of  the  Roxana  Petroleum  Co.  was  con- 
veyed to  the  Dundee  Corporation.  At  the  time  of  the  recent  merger 
the  Dundee  interests  received  the  Shell-Union  stock  in  exchange 
for  its  holdings  in  the  Roxana  Petroleum  Corporation.  The  balance 
sheets  of  the  Dundee  Corporation  for  December,  1920,  and  June  30, 
1922,  are  given  in  Appendix  Table  30,  p.  151.  This  company  is  not 
a  member  of  the  Royal  Dutch-Shell  group. 

The  Union  of  Delaware  received  2,240,000  shares,  i.  e.,  28  per  cent 
of  the  total  common  stock  issued.  Reference  was  made  (p.  23)  to 
the  Union  of  Delaware  circular  offering  139,000  of  these  shares  for 
sale  to  their  stockholders  at  $12  per  share  in  order  to  hquidate  some 
of  its  indebtedness.  The  offering  was  oversubscribed;  155,000  shares 
were  sold  and  are  now  quoted  on  the  New  York  Exchange. 

During  the  past  summer  (1922)  the  Shell  Union  Oil  Corporation 
sold  200,000  shares  (par  value  $100)  of  6  per  cent  cumulative  pre- 
ferred stock  to  Lee,  Higginson  &  Co.  This  stock  was  listed  on  the 
New  York  Stock  Exchange  and  is  now  being  sold  to  investors.  The 
preferred-stock  holders  have  no  voting  power  except  under  very 
special  circumstances  affecting  their  dividends. 

The  Shell-Union  in  turn  owns  all  the  issued  preferred  and  comnion 
stock  of  the  Roxana  Petroleum  Corporation  and  the  Ozark  Pipe  Line 
Corporation  and  also  all  the  common  stock  of  the  Matador  Petroleum 
Co.  The  Shell  Co.  of  California  has  only  common  stock  outstanding, 
and  all  except  about  20  shares  is  held  by  the  Shell-Union;  conse- 
quently there  is  no  doubt  about  the  complete  foreign  control  of  the 
Shell-Union,  Shell  of  California,  Roxana,  and  Matador  companies. 

Foreign  interests  in  Union  of  Delaware.— This  company  had 
1,389,310  share  of  common  stock  issued  and  outstanding  on  June  30, 
1922.  The  commission  obtained  from  the  records  of  the  company  a 
list  of  all  shareholders  with  foreign  addresses  and  also  another  list 
containing  the  names  and  addresses  of  all  other  stockholders  owning 
1,000  shares  or  over,  with  the  number  of  shares  so  held.  Inquiries 
were  then  directed  to  these  holders  to  determine  if  they  held  the 
beneficial  interest  in  the  stock  listed  in  their  names  and,  if  not,  to 
furnish  the  names  and  addresses  of  all  holders  of  100  shares  or  over 
who  held  such  beneficial  interest.  These  inquiries  included  the  holders 
of  more  than  923,000  shares, or  about  66  per  cent  of  the  total  shares 
outstanding. 


■"'■*•:'':**•">•''*".?' 


32 


FOREIGN   OWNERSHIP   IN   THE  PETROLEUM   INin'STRY. 


■,*>* 


ft-  .1 
y     •     ■  • 


The  replies  from  stockholders  received  showed  732,000  shares 
reported  by  holders  with  United  States  addresses,  while  22,280  had 
foreign  addresses.  Thus  the  domestic  holders  had  732,000  shares 
out  of  754,000,  or  97  per  cent,  and  the  foreigners  about  3  per  cent. 

Union  Oil  Co.  or  California. — This  compajiy  has  500,000  shares 
of  common  stock  issued,  of  which  the  Shell-I^iioJi  holds  130,869 
shares,  or  slightl}'  over  26  per  cent.  Miscellaneous  foreign  holders 
have  651  shares  and  sundry  domestic  holders  94,647  shares,  while 
the  Union  Oil  Associates  have  273,833  shares,  or  about  55  per  cent  of 
the  entire  stock  outstandiiio^. 

Dissolution  of  Union  Oil  Co.  (Delaware). — On  September  26, 
1922,  a  notice  (Exhibit  7,  p.  85)  of  a  meeting  of  stockholders  of  the 
I'nion  Oil  Co.  (Delaware)  was  sent  out  anju)uncing  a  special  meeting 
to  be  held  October  20,  1922,  to  act  upon  the  following  action  of  the 
board  of  directors: 

Rc-soUuff,  That  in  the  jud^mont  of  the  hoard  of  dii<(  tors  (»f  I'liioii  Oil  Co..  a  Delaware 
eor])oration,  it  is  advieahlo  and  most  for  the  1  enefit  of  naid  company  that  it  should  he 
dissolved  and  that  its  assets,  after  its  dehl--  ha\e  heen  paid  or  provided  for.  should  l>e 
distrihuted  amoni?  its  stockholders. 

Under  date  of  October  25,  1922,  James  II.  Brookmire,  president 
of  the  Union  Oil  Co.  (Delaware),  informed  the  commission  that  the 
general  meeting  of  the  stockholders  had  approved  the  resolution 
authorizing  the  dissolution  of  the  company.* 

According  to  the  original  agreement  the  directorate  of  the  Shell- 
l^nion  consisted  of  not  more  than  19  persons,  14  of  whom  were  to  be 
nominated  by  the  Anglo-Saxon  Co.,  a  subsidiary  of  the  Royal  Dutch- 
Shell  group,  and  5  by  the  Union  Oil  Co.  (Delaware).  (See  Exhibit  4, 
p.  73.)  At  a  recent  meeting  of  the  stocldiolders  the  immber  of  direc- 
tors was  increased  to  25  and  new  officers  were  elected.  In  its  report 
of  this  meeting  the  Wall  Street  Journal  of  November  10,  1922,  stated: 

At  a  meetin^r  of  tlie  Shell-Union  Oil  Corporation,  Sir  Henry  W.  A.  Deterdin^jr, 
uianai^inir  director  of  the  Royal  Dutch-Shell  i^roup,  was  elected  president  to  succeed 
William  TI,  Allen,  resii;ned.  Directorate  was  also  in^'reased  hv  five  members  from 
20  to  2".  and  live  ref)resentatives  of  the  Royal  Dutch-Shell  urroup  were  made  directoi-s. 

1  ive  additional  directors  ele<ted,  representin;^  the  leadini?  Royal-Dutch  interests 
are  as  lollows:  J.  15.  A.  Kessler,  Alexander  Mackay,  Dr.  Au*r.  Phillips.  lion.  Walter 
H.  Samuel,  and  Sir  Rol)e:t  Walev-Cohen. 

The  continual  growth  of  Shell-Union  in  this  country,  au^rmpnted  by  its  recent 
acquisition  of  Union  Oil  of  Delav^-are,  ha«  made  th(^  leading  interestis  of  the  Royal 
Dut<'h,  which  owns  72  |ht  cent  of  Shell- Union  sttx-k.  feel  that  they  wish  to  become 
more  a'tively  identified  with  itg  grov.th  and  development. 

It  is  evident  from  the  above  that  the  Royal  Dutch-Shell  interests 
now  have  complete  control  of  the  properties  acquired  from  Union 
Oil  Co.  (Delaware).  Sir  Henri  W.  A.  Deterding,  who  was  recent!)' 
elected  president  of  the  Shell  Union  Corporation,  is  managing  director 
'of  the  Royal  Dutch  Co.  and  the  Hon.  Walter  H.  Samuel  is  chairman 
of  the  Shell  Transport  &  Trading  Co. 

»  A  circular  to  the  stockholders  of  the  Union  Oil  Co.  (Delaware)  sent  out  by  the  president,  James  H. 
Brooknure,  under  date  of  Dec.  22,  1922,  stated  that  about  2,0S4,00U  shares  of  Snell-l'nion  stock  had  been 
distributed  to  stockholders  of  the  Union  of  Delaware  and  that  the  latter  company  still  had  about  1,000 
shares  of  undistributed  Shell-Union  stock. 


*  « 


Chapter  IV. 
FOREIGN  INTERESTS  IN  THE  UNITED  STATES. 

Section  1.  Policy  of  the  United  States. 

Prior  to  1920  this  country  allowed  foreign  capital  the  same  privi- 
leges to  acquire  and  dev^elop  its  natural  resources  as  was  granted  its 
own  nationals.  The  policy  of  the  United  States  was  taken  advantage 
of  by  the  citizens  of  all  of  the  important  foreign  nations,  with  the  re- 
sult that  the  foreign  investment  in  railroads,  public  utilities,  mines, 
ranches,  and  other  industries  increased  continuously  during  the  past 
century,  until  at  the  time  of  the  World  War  (1914)  it  was  said  that 
foreign  investments  in  this  country  aggregated  at  least  So, 000, 000, 000. 
Many  securities  held  by  foreign  holders  were  redeemed  during  the 
war  and  the  United  States  passed  from  the  status  of  a  debtor  to  that 
of  a  creditor  nation.  On  account  of  the  lack  of  reciprocity  on  the 
part  of  certain  nations  which  control  valuable  petroleum  deposits 
the  United  States  Congress  included  the  following  provision  in  the 
general  leasing  act,  adopted  February  25,  1920: 

That  citizens  of  another  country,  the  taws,  customs,  or  resrulations  of  which  deny 
similar  or  like  ])rLvile.u:es  to  citizens  or  cor])orationt^  of  this  country,  shall  not  by  stock 
ownership,  stock  holdinirs,  or  stock  f-ontrol  own  any  interest  in  any  lease  acquired, 
under  the  provisions  of  this  act. 

Among  the  other  results  of  the  war  it  may  be  noted  that  a  spirit 
of  Jiatiojialism  was  awakened  in  all  of  the  important  countries  of  the 
world,  which  involved  the  ideas  of  self-determination,  self-preserva- 
tion, and  national  security.  The  latter  idea  immediately  suggested 
the  importance  of  conserving  the  natural  resources  and  raw  materials 
of  any  given  country  and  of  extending  holdings  by  acquisitions  abroad. 
These  considerations  led  to  the  adoption  of  governmental  programs 
of  exclusion  or  discrimination  agaiiist  foreigners,  t(  gether  witli  the 
development  of  their  own  natural  resources  by  their  own  citizens. 
Due  to  the  demonstrated  vital  importance  of  large  supplies  of  petro- 
leum products  in  the  World  War  for  oil-burning  navies,  for  the  merchant 
marine,  for  air})lanes,  and  for  the  transportation  of  iVrmy  supplies  and 
equipment,  there  was  a  widespread  realization  that  a  nation  possess- 
ing ample  petroleum  reserves  liad  a  tremendous  advantage  over  any 
nation  not  possessirg  adequate  supplies  of  petroleum  products. 

Although  the  United  States  now  produces  over  60  per  cent  of  the 
world's  totsl  output  of  crude  petroleum,  its  production  has  not  kept 
])ace  with  the  growth  of  its  requirements  for  domesticxand  foreign 
trade.  For  example,  in  1917  the  production  of  this  countrv  was 
335,316,000  barrels  and  in  1921  469,639,000  barrels,  while  tlie  net 
imports,  i.  e.,  imports  k^s  experts  of  crude  petroleum,  increased  from 
26,009,000  barrels  in  1917  to  116,367,000  barrels  in  1921.  In  order 
to  meet  its  nipidly  growing  domestic  and  export  trade  the  known  oil 
fields  of  this  coimtry  are  being  rapidly  depleted.  Moreover,  its  pres- 
ent sources  of  supply  are  concentrated  in  the  United  States  and 
Mexico,  while  those  of  its  chief  foreign  competitors  are  widely  dis- 
tributed geographically.  It  appears  self-evident  that  a  country  hav- 
ing widelv  distributed  sources  of  supply,  storage,  and  distributing 
facilities  is  in  a  much  stronger  competitive  position  than  one  with 

33 


im 


fe-' 


!>•» 


ti  ■■■-^'M 


84 


FOHKIGX    OWNERSHIP   IN    THE   PETROLEUM   INDUSTRY. 


concentrated  sources  of  suj)ply.  In  this  connection  the  following 
excerpt  from  a  statement  of  Sir  Mackay  Edgar,  head  of  the  firm  of 
vSperlin^  &  Co.,  London  bankers,  under  London  date  of  April  24,  1920, 
on  the  international  petroleum  situation  is  of  interest: 

While  America  is  exhausting  her  supplies  at  a  prodigal  speed  we  are  getting  a  firmer 
grip  upon  the  world's  oil  reeerves.     *    *    *  •       ,    ^      • 

Transport  is  another  crucial  point.  In  the  next  few  years  the  governing  factor  in 
the  oil  position  will  be  not  the  amount  produ(  ed,  but  the  number  of  available  tankers. 
Men  like  Doherty  and  Bedford  understand  the  position  and  are  diligently  scouring 
the  world  for  new  oil  fields,  but  wherever  they  liave  turned  they  found  British  enter- 
prise before  them  aiul  the  control  of  the  most  promising  properties  in  British  hands. 

Section  2.  Other  foreign  interests  in  the  United  States. 

The  development  of  the  petroleum  acauisitions  of  the  Royal 
Dutch-Shell  group  in  California  and  the  mid-continent  oil  fields  was 
discussed  in  the  preceding  chapters.  ,^     ,  , 

Reference  was  made  to  the  holdings  of  the  Petroleum-l^rodukte 
Aktien-Gesellschaft  in  the  Union  Petroleum  Co.  and  to  purchases  of 
petroleum  products  from  the  Gulf  Refining  Co.  made  by  the  Shell 
interests  about  the  beginning  of  this  century.  (See  p.  9.)  About 
the  same  time  Messrs.  Balfour  and  Guthrie  (British)  organized  a  pro- 
ducing company,  the  California  Oilfields  (Ltd.),  in  the  Coahnga  field 
in  California.  During  the  first  decade  of  the  century  the  Dundee 
interests  secured  holdings  in  Oklahoma.  (See  p.  31.)  These  last 
two  properties  were  later  acquired  by  subsidiaries  of  the  Royal 
Dutch-Shell  group.  The  connection  of  foreigners  with  the  early 
developments  in  Wyoming,  now  attracting  so  much  attention,  was 
outlined  by  the  commission  in  a  previous  report  as  follows:  * 

The  history  of  the  earlv  development  of  the  Shannon  pool  of  the  Salt  Creek  field  is 
unique  in  that  it  was  largelv  developed  by  foreign  capital.  Certain  Belgian,  Dutch, 
and  French  capitalists  became  interested  in  this  field  soon  after  the  venture  of  the 
Pennsvlvania  Oil  ct  (las  (o.  had  proven  unprofitable.  These  foreign  capitalists 
belonged  to  two  distinct  groups.  The  first  group  included  the  real  pioneers 
and  accuiired  the  Shannon  claims  which  had  l)een  secured  from  the  Pennsylvania  Oil  & 
Oas  Co  In  1905  these  claims  were  transferred  to  the  Soci6t6  Belgo-Americame  des 
Petroles  du  Wyoming,  a  Wyoming  corporation  financed  ])y  Belgian  and  French  capi- 
talists These  claims  did  not  cover  the  entire  Shannon  pool,  and  Lobell  secured 
control  of  the  claims  held  by  Cy  Iba  and  transferred  them,  in  !1K)7.  to  a  Dutch  com- 
panv  known  as  the  Petroleum  Maatschappij  Salt  Oeek.  a  toreign  cori)oration.  I  his 
company  was  later  incor]>orated  in  Wyoming  under  the  same  name.  1  he  selection  of 
the  clainis  for  the  Petroleum  ^raatschappij  Salt  Creek  of  Wyoming  was  made  by  Dr. 
(^esare  Porro,  an  Italian  geologist.     *     *    *.    .        ^  ,^        ,         •.  t  .     i  •   *^ 

The  second  group  of  foreign  interests,  consisting  of  l^rench  cai)itali8ts,  became  inter- 
ested in  the  Salt  Creek  field  about  1910  through  the  efforts  of  Verner  Z.  Reed,  of 
Denver.  Colo.  Reed  obtained  about  $600,000  from  them,  and  through  the  Reed 
Investment  Co.,  a  company  engaged  in  the  promotion  bu.^iness,  the  Midwest  Oil  (  o. 
was  organized  in  February.  1911. 

A  partial  list  of  the  British  oil  companies  operating  in  the  United 
States  is  given  below. 


C/orpan  Oilfields  (Ltd.V 
Imperial  Petroleum  Co. 
Kansas-Oklahoma    Oil    &.    Refining   Co. 

(Ltd.). 
Kern  River  Oilfields  of  California  (Ltd.). 
Midway  Consolidated  (Ltd.). 
Nowata  Oilfields  Syndicate  (Ltd.). 
Oil  Lands  Development  Co.  of  Oklahoma 

(Ltd.). 
Oktaha  Oilfields  (Ltd.). 

1  Federal  Trade  (^ommLssion,  I'etroleum  Industry  of  Wyoming,  p.  19. 


Pacific  Oilfields  (Ltd.). 
Pacific  Petroleum  Co.  (Ltd.). 
Pecos  Vallev  Oil  Co.  (Ltd.). 
Petroleum  Exploration  Co.  CLtd.). 
St.  Helen's  Petroleum  Co.  (Ltd.). 
Santa  Maria  Oilfields  (Inc.). 
Scottish  Oklahoma  Oil  Co.  (Ltd.). 
Southern  California  Oil  Syndicate  (Ltd.). 
Tulsa  Oil  Co.  (Ltd.). 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


35 


Oklahoma  State  Oil  Co. 
Tulsa  Oil  Co. 


In  addition  to  the  companies  mentioned  above  there  are  doubtless 
many  other  corporations  wholly  or  partly  owned  by  foreign  capitalists 
that  own  petroleum  production  in  this  country.  For  example,  the 
Union  des  Petroles  d^Oklahoma,  which  was  organized  in  France  in 
1911,  formerly  owned  all  of  the  outstanding  stock  of  the  following 
American  companies: 

Monitor  Oil  &  ftas  Co. 

Reese  Oil  Co. 

Terrain  Oil  Co.  I 

In  1918  the  properties  owned  bv  the  above  companies  were  con- 
veyed to  the  Oklahoma  Producing  &  Refining  Corporation  of  America, 
and  this  latter  company  was  controlled  by  the  Oklahoma  Producing 
&  Refining  Co.  and  the  Union  des  Petroles  d'Oklahoma.  In  1920 
the  Ohio  Cities  Gas  Co.,  now  the  Pure  Oil  Co.,  acquired  about  63  per 
cent  of  the  common  stock  of  the  Union  des  Petroles  d'Oklahoma,  and' 
in  1922  its  preferred  stock  held  by  French  stockholders  was  acquired 
by  the  Pure  Oil  Co. 

The  resum6  given  above  clearly  shows  that  equal  opportunities  for 
the  nationals  of  all  countries  to^  participate  in  the  development  of 
domestic  petroleum  deposits  has  been  the  American  policy,  and  the 
American  petroleum  industry  therefore  naturally  expected  that  a 
similar  freedom  of  action  would  be  extended  to  it  by  other  countries 
possessing  prospective  petroleum  areas. 

Section  3.  Recent  activities  of  foreign  interests. 

Pacific  Oil  Co. — The  reported  acquisition  by  foreign  interests  of 
the  stock  of  the  Pacific  Oil  Co.  was  referred  to  in  a  previous  report  of 
the  commission.^ 

Mr.  Kingsbury's  statement  that  'control  of  the  Pacific  Oil  Co.  was  sought  by  foreign 
interests' '  referred  to  the  Roval  Dutch-Shell  group. 

Inquiry  was  made  of  the  Royal  Dutch-Shell  group  by  the  commission  whether  it 
had  acquired  or  was  acquiring  any  interest  in  the  Pacific  Oil  Co.,  to  which  Gen. 
Averv  D.  Andrews,  representative  of  the  Royal  Dutch-Shell  group  replied  as  follows: 

"Replying  to  your  telegram  November  21,  received  22d,  I  am  now  authorized  to 
state  that  the  Dutch-Shell  interests,  by  which  I  mean  Royal  Dutch  Petroleum  Co.  of 
Holland  and  Shell  Transport  &  Trading  Co.  of  London  and  their  subsidiary  companies, 
do  not  own  and  are  not  now  acquiring  Pacific  Oil  Co.  stock." 

The  commission  communicated  with  K.  R.  Kingsbury,  president 
of  the  Standard  Oil  Co.  (California),  regarding  a  statement  made  by 
him  that  ''Pacific  Oil  Co.  was  sought  by  foreign  interests,"  and 
received  his  reply,  dated  August  31,  1922,  as  follows: 

Regarding  the  statement  made  in  my  letter  to  the  commission  about  a  year  ago  to 
the  effect  that  "Pacific  Oil  Co.  was  sought  by  foreign  interests":  A  statement  was 
made  to  me  early  in  December.  1920,  by  Capt.  John  Barneson,  president  of  the  General 
Petroleum  Corporation,  to  the  effect  that  he  knew  that  Shell  interests  in  London  were 
endeavoring  to  acquire  a  substantial  interest  in  the  Pacific  Oil  Co.  I  would  refer 
vou  to  him  for  specific  evidence  in  this  regard.  It  was  about  the  time  of  his  statement 
to  me  that  o\ir  company  made  ita  first  purchases  of  the  stock  of  the  Pacific  Oil  Co. 
With  the  knowledge  that  Shell  interests  were  desirous  of  acquiring  this  property,  we 
were  verv  active  over  a  period  of  several  months  in  our  effort  to  secure  on  the  open 
market  the  floating  supply  of  stock  which  might  easily  be  acquired  in  the  same  manner 
by  these  foreign  interests. 

During  1921  the  Standard  of  California  acquired  an  interest  of 
less  than  20  per  cent  in  the  Pacific  Oil  Co. 

» Federal  Trade  Commission,  Paciflc  Coast  Petroleum  Industry,  Part  II,  p.  131. 


36 


f()ri:i(;n  ownership  in  the  petroleum  industry. 


The  commission  recently  wrote  to  Capt.  John  Barneson,  president 
of  the  General  Petrohnim  Corporation,  requesting  the  facts  regarding 
his  statement  that  the  Shell  interests  in  London  were  endeavoring 
to  acquire  a  substantial  interest  in  the  Pacific  Oil  Co.,  and  received 
his  reply,  under  date  of  September  29,  1922,  as  follows: 

Repljdng  to  your  inquiry  of  September  7.  1922,  requesting  me  to  furnish  you  with 
any  information  that  I  may  have  "that  in  the  fall  of  1920  the  Shell  interests  in  London 
were  endeavoring  to  acquire  a  sul^stantial  interest  in  tlie  Pacific  Oil  Co.  " 

I  have  to  advise  you  that,  regardless  of  a  firm  conclusion  in  my  own  mind.  I  am 
unahle  to  furnish  proof  that  would  carry  weight  in  a  formal  hearing  before  your  com- 
mission. 

In  October.  1920.  a  man  came  to  me  with  letters  from  some  New  York  business 
associates  and  advised  me  that  he  was  working  on  a  plan  to  acquire  an  int^erest  in 
the  oil  lands  then  held  under  control  of  the  Southern  Pacific  Railroad.  He  asked 
my  cooperation  in  his  project,  which  1  was  unable  to  give  him.  However,  at  my 
request  the  counsel  of  tne  General  Petroleum  Corporation  and  the  head  of  tlie  land 
department  prepared  a  report  for  him  on  the  oil  properties  of  the  Southern  Pacific. 

I  have  never  seen  the  man  since  his  first  visit.  However,  in  November,  1920,  he 
wrote  and  cabled  to  me  from  London  that  he  had  put  the  proposition  up  to  the  Royal 
Dutch  Shell  Co..  and  advised  me  that  they  were  interested  and  desired  my  cooper- 
ation in  an  attempt  to  secure  the  property.  About  the  same  time  I  received  the 
following  cable  from  London: 

"We  have  conferred  with  Blank  to-day.  We  consider  business  greatest  interest 
and  importance,  but  feel  that  your  presence  here  absolutely  necessary  and  indispen- 
sable to  further  progi'ess.  We  cordially  invite  you  to  visit  us  as  soon  as  possible. 
Please  reply  immediately  to  London.     (Signed)     Samuels."* 

I  immediately  replied  to  this  message  as  follows: 

•'Appreciate  your  invitation,  but,  as  Blank  knows,  can  not  act  in  this  matter. 
Regards.     (Signed)     Barneson." 

Since  then  1  have  heard  nothing  further  from  them.  These  cables,  as  you  ^^•ill  note, 
were  exchanged  prior  to  the  organization  of  the  Pacific  Oil  Co. 

The  reason  the  Royal  Dutch-Shell  group  was  interested  in  the  pro- 
ducing properties  now  owned  by  the  Pacific  Oil  Co.  will  be  apparent 
when  it  is  noted  that  the  production  of  crude  petroleum  from  the 
properties  owned  by  the  latter  company  was  9,474,000  barrels  in  1919, 
or  9.3  per  cent  of  the  total  production  of  California;  11,170,000  bar- 
rels in  1920,  or  10.6  per  cent  of  that  total;  14,047,000  barrels  in  1921, 
or  12.5  per  cent.  The  Pacific  Oil  Co.  also  owns  slightly  more  than  oO 
per  cent  of  the  Associated  Oil  Co.  This  latter  company  ranks  third 
m  importance  in  the  refining  and  marketing  business  of  the  Pacific 
coast.  The  combined  production  of  the  Associated-Pacific  Oil  Co.'s 
interests  in  1919  was  18,444,000  barrels  of  crude  petroleum,  or  18.2 
per  cent  of  that  of  California;  in  1920,  17,536,000  barrels,  or  16.6 
per  cent  of  that  total:  in  1921,  20,025,000  barrels,  or  17.8  per  cent. 

The  commission  has  received  no  information  of  any  subsequent 
attempts  of  foreign  nationals  to  obtain  an  interest  in  or  the  control  of 
the  Pacific  Oil  Co. 

Associated  Oil  Co. — A  report  written  in  1916  by  M.  L.  Requa, 
then  consulting  engineer  of  the  united  States  Bureau  of  Mines,  stated  :* 

It  is  a  well-known  fact  that  the  Union  and  probably  the  Associated  Oil  companies 
of  California  would  have  passed  into  British  ownership  had  not  war  broken'out. 

In  order  to  ascertain  the  circumstances  concerning  the  above  the 
commission  wrote  the  Associated  Oil  Co.  requesting  them  to  state  facts 
in  connection  with  the  above  question  and  whether  any  attempts  were 
made  at  a  subsequent  date  to  secure  ati  interest  in  or  control  of  the 
Associated  Oil  Co. 


*  The  Hon.  Walter  H.  .Samuel  is  chairman  of  the  Shell  Transnort  it  Trading  Co. 

*  Senate  Oocu  nent  .N'o. .{  <\,  Sixty-fo.irth  Congress,  first  .^session,  p.  is. 


V  i 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


37 


On  September  20,  1922,  a  reply  was  received  from  Paul  Shoup, 
president  of  the  Associated  Oil  Co.,  as  follows: 

There  have  been  no  attempts  made  by  any  foreign  interest  to  acquire  any  interest 
in  the  Associated  Oil  C'o.,  large  or  otherwise,  since  my  association  ^^'ith  this  company, 
beginning  in  1918.  and  I  understand  that  no  such  effort  was  made  during  the  war 
period.  Am  not  familiar  with  the  cause  of  Mr.  Requa 's  conclu.^ion  that  the  Asso- 
ciated might  have  passed  into  foreign  hands  prior  to  the  outbreak  of  the  war,  but  if 
you  wish  can  delve  further  into  tliat  subject. 

The  commission  requested  the  president  of  the  Associated  Oil  Co. 
to  inquire  further  into  the  subject  and  to  furnish  the  commission 
with  any  data  that  he  might  obtain  concerning  this  matter,  but  no 
additional  information  was  secured.  The  facts  regarding  foreign 
interests  in  the  Union  Oil  Co.  of  California  are  given  on  page  32. 

Alleged  activities  of  Royal  Dutch-Shell. — During  the  sum- 
mer of  1922  various  rumors  were  circulated  concerning  recent  alleged 
efforts  of  the  Royal  Dutch-Shell  interests  to  further  extend  their 
holdings  in  American  oil  properties.  In  this  connection  several  of 
the  principal  independent  oil  companies  in  the  mid-continent  oil 
fields  were  said  to  have  either  been  approached  by  or  had  entered 
into  negotiations  with  Royal  Dutch-Shell  interests  with  a  view  to 
the  latter's  acquisition  of  their  properties  and  business.  The  com- 
mission made  a  careful  inquiry  to  ascertain  the  truth  or  falsity  of 
these  rumors,  with  the  result  that  in  no  instance  was  there  found  any 
evidence  that  the  Royal  Dutch-Shell  interests  had  made  any  definite 
effort  to  acquire  either  a  partial  or  complete  control  of  the  oil  prop- 
erties or  business  of  any  of  the  American  companies  with  respect  to 
which  the  rumors  had  been  circulated.  On  the  contrary,  the  com- 
mission's investigation  disclosed  that  certain  persons  prominentl}' 
identified  with  some  of  the  principal  indepenclent  producing  com- 
panies in  the  mid-continent  oil  fields  on  their  own  initiative  had 
sought  to  dispose  of  a  minority  interest  in  an  important  American 
oil-producing  company  to  the  Royal  Dutch-Shell  interests.  It 
appears,  however,  that  notwithstanding  this  proposition  was  sup- 
ported by  other  substantial  inducements,  the  effort  did  not  meet 
with  success.  The  refusal  of  the  Royal  Dutch-Shell  interests  to 
enter  into  this  transaction  is  thought  to  be  due  largely  to  the  unsat- 
isfactory experience  following  their  acquisition  of  a  minority  interest 
in  the  Union  Oil  Co.  of  California. 

Section  4.  Protective  measures. 

General  leasing  law. — As  already  stated,  in  an  effort  to  secure 
reciprocity  and  equal  opportunity  for  American  interests  in  foreign 
oil  fields,  the  United  States  Congress  included  the  following  provision 
in  the  act  passed  February  25,  1920:® 

That  citizens  of  another  country,  the  laws,  lustonis,  or  regulations  of  which  deny 
similar  or  like  privile^res  to  citizens  or  corporations  of  this  country,  shall  not  by  stock 
ownershij),  sto  k  holding,  or  stock  control  own  any  interest  in  any  lease  acquired 
under  the  provisions  of  this  act. 

It  is  understood  that  the  Royal  Dutch-Shell  interests,  as  repre- 
sented by  the  Shell  Co.  of  California  and  the  Roxana  Petroleum 
Corporation,  have  made  several  applications  for  leases  under  this  law, 
none  of  which  has  been  granted,  but  which  remain  under  considera- 

'  Oil  leasing  law  or  mineral  land  leasing  law,  Public.  No.  146,  66th  Cong.  (S.  2775).  An  act  to  promote 
the  juining  of  coal,  phosphate,  oil,  oil  shaie,  ga.-^,  and  sodium  on  the  public  domain,  p.  1. 


V 


4 


i 


.  A 


38 


FORKIGX    OWNERSHIP    IX    THK   THTROLEUM   INDUSTRY. 


tion  by  the  Department  of  the  Interior,  with  the  burden  of  proof  on 
the  applicant,  as  shown  by  the  following,  which  states  that  the  Sec- 
retary of  the  Interior  has  ruled  that  the  department — 

must  })e  satisfiod  of  the  qiialifiratioii  and  riv'ht  of  the  applicant  Shell  Co.  before  any 
permit  or  lease  to  it  is  granted.  Jt  is  incumbent  upon  the  ap})lif  ant  ( onipany  To 
prove  its  qualifications. 

Union  Oil  Associates. — During  the  summer  of  1921,  when  re- 
ports regarding  the  consolidation  o?  the  Royal  Dutch-Shell  interests 
with  the  Union  Oil  Co.  (Delaware)  were  circulated,  the  stockholdei-s 
of  the  Union  Oil  Co.  of  California  foresaw  the  possibility  of  a  foreign 
corporation  obtaining  control  of  that  company,  as  the  Union  Oil  Co. 
(Delaware)  owned  130,869  shares,  or  over  26  per  cent,  of  the  issued 
stock  of  the  Union  of  California.  Steps  were  taken  at  once  to  con- 
solidate or  pool  the  remaining  shares  of  the  Union  of  California  stock 
by  creating  an  American  organization  to  control  that  stock.  (See 
Exhibit  8,  p.  86.)  With  this  purpose  in  view,  the  Union  Oil  Asso- 
ciates was  incon^orated  on  March  28,  1922,  with  capital  stock  of 
300,000  shares  of  $100  par  value,  which  were  to  be  excnanged  for  an 
equal  number  of  shares  of  the  Union  of  California,  which  had  500,000 
shares  outstanding.  On  June  30,  1922,  the  new  organization  had 
acquired  273,833  shares  of  the  Union  of  California  stock,  and  this 
number  on  August  31,  1922,  had  increased  to  274,738  shares,  or  ap- 
proximately 55  per  cent  of  the  total  stock  issued  and  outstanding. 
(See  Table  18,  p.  30.)  The  success  of  the  new  holding  companv  in 
securing  possession  of  Union  of  California  shares  seems  to  preclude 
the  possibility  of  management  of  the  old  company  passing  under 
foreign  control. 

Curtis  bill.— -This  bill  was  introduced  October  30,  1919,  in  the 
Senate,  Sixty-sixth  Congress,  first  session,  and  was  designed  to 
encourage  reciprocity  in  trade  relations.  (See  Exhibit  9,  p.  89.) 
It  stated  that  no  citizen  or  subject  of  any  country  which  prevents  or 
prohibits  American  citizens,  because  of  their  nationality,  from  being 
shareliolders  or  operators  in  any  undertaking  for  the  development 
of  mines  or  minerals,  including  petroleum,  should  be  permitted  to 
acquire  or  develop  similar  properties  in  the  United  States  or  its 
dependencies.  A  similar  provision  was  included  against  any  alien 
company  which  would  not  allow  American  citizens  to  participate  in 
its  operations,  and  there  was  also  an  enacting  clause  directing  the 
sale  of  any  foreign  properties  that  come  within  the  prohibition. 
This  was  one  of  the  first  bills  introduced,  but  not  passed,  which  aimed 
to  secure  reciprocity  in  this  respect. 

PiiELAN  BILL. — Tliis  bill  was  introduced  Mav  17,  1920,  in  the 
Senate,  Sixty-sixth  Congress,  second  session,  and  it  was  designed  to 
authorize  the  establishment  of  an  American  company  for  the  develop- 
ment of  the  oil  resources  in  foreign  countries.  The  directors  of  the 
company  were  to  be  appointed  by  the  President  of  the  United  States. 
The  company  was  to  develop  petroleum  properties,  and  any  of  its 
products  were  to  be  subject  to  preemption  by  the  United  States  upon 
payment  of  the  market  price.  The  majority  of  the  stockholders 
were  to  be  citizens  of  the  United  States,  but  foreign  citizens  might  be 
minority  holders  of  stock.     (See  Exhibit  10,  p.  90.) 


Chapter  V. 

RESTRICTIVE   POLICIES   AND   ADMINISTRATIVE  PRACTICES 

OF  FOREIGN  GOVERNMENTS. 

Section  1.  Statement  of  the  resolution. 

Tlie  resolution  pursuant  to  which  this  report  is  made  directed  the 
commission  to  ascertain:  Whether  or  not  Great  Britain,  the  British 
Dominions,  Holland,  Rumania,  or  other  countries  having  oil  lands 
within  their  territories  discriminate  against  American  citizens  with 
respect  to  the  ownership  of  oil  lands,  or  with  respect  to  the  owner- 
ship of  shares  in  corporations  which  are  organized  to  exploit  and  de- 
velop oil  lands  or  engaged  in  the  production  of  petroleum. 

Section  2.  Sources  of  information. 

The  subject  of  foreign  discrimination  against,  and  restriction  of, 
American  enterprise  in  the  acquisition  of  petroleum  lands  in  foreign 
oil  fields  has  afready  been  the  matter  of  study  by  several  depart- 
ments of  the  United  States  Government,  and  considerable  informa- 
tion thereon  was  brought  to  the  attention  of  Congress  during  the  last 
three  or  four  years,  which,  together  with  Senate  documents  on  the 
subject,  was  available  to  the  commission.  The  comnaission  also 
obtained  new  information,  especially  from  domestic  oil  companies 
that  have  secured  or  have  attempted  to  secure  producing  properties 
in  foreign  lands.  The  American  Petroleum  Institute  furnished  con- 
siderable information  of  value.     (See  Exhibit  11,  jp.  90.) 

Section  3.  General  attitude  of  the  principal  foreign  governments. 

Although  it  is  not  uncommon  for  foreign  governments  to  place 
some  restrictions  upon  the  exploitation  of  the  petrolemn  resources 
within  their  domams  by  aliens,  prominent  cases  of  exclusion  of 
citizens  of  the  United  States  which  have  been  brought  to  the  attention 
of  the  commission  were  in  British  India  and  the  Dutch  East  Indies. 
In  the  case  of  British  India  a  single  company,  the  Burrna  Oil  Co.,  i 
has  had  a  monopoly  of  the  crude  petroleum  producing  business  in  the 
oil  fields  of  Burma.  The  Burma  Oil  Co.  is  partly  owned  by  the  Anglo- 
Persian  Oil  Co.  (Ltd.),  in  which  the  British  Government  is  interested. 

American  interests  have  repeatedly,  but  unsuccessfully,  attempted 
to  obtain  oil  concessions  in  British  India.  According  to  a  letter  from 
the  Standard  Oil  Co.  of  New  York  to  the  Department  of  State  dated 
Februar;^^  24,  1922,  early  in  1902  the  Colonial  Oil  Co.  of  New  Jersey, 
a  subsidiary  of  the  Standard  Oil  Co.  (New  Jersey) ,  applied  for  a  license 
to  prospect  for  crude  petroleum  in  Upper  Burma,  the  application  was 
denied  without  any  reason  being  assigned  for  its  refusal.  In  June 
of  the  same  year  the  Anglo-American  Oil  Co.  (Ltd.),  a  subsidiary 
of  the  Standard  Oil  Co.  (New  Jersey),  which  was  registered  in  Great 
Britain,  also  made  application  for  a  prospecting  license.  The  aid  of 
General  Patterson,  United  States  consul  general  in  India,  was  in- 

39 


in 


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■.■.M>Jf,Ul*,.«JI. !  Jft.'m->JJlJWJ!Ii.'.Li!llLg 


.  »»■«  »  ,  isJSy.Srf' 


40 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


voked,  and  lie  was  informed  that  the  Government  of  India  did  not 
desire  ''  to  introduce  any  American  oil  companies  or  their  subsidiaries 
into  Burma." 

According  to  the  hitest  available  information  the  policy  of  the 
Government  of  India  with  respect  to  foreign  participation  in  the 
development  of  its  petroleum  resources  has  not  been  modified.  The 
opposition  to  American  companies  was  not  Umited  to  the  acquisition 
or  development  of  oil  lands,  but  extended  to  the  ownership  of  refining 
and  distributing  facilities.  For  example,  the  Standard  Oil  Co.  of 
New  York  states  it  was  not  allowed  to  purchase  a  warehouse  site 
in  Burma.     (See  p.  44.) 

The  foregoing  sliows  the  attitude  of  the  British  Government  during 
the  early  history  of  the  petroleum  industry.  Subsequent  events 
have  indicated  a  continuance  on  the  part  of  Great  Britain  and  British 
colonies  of  policies  of  restriction  upon  foreigners  in  respect  to  the 
development  and  exploitation  of  some  of  their  most  promising  oil 
areas.  Such  restrictive  policies  are  followed  not  only  by  the  British 
Empire,  but  by  the  Netherlands,  France,  and  other  countries.  These 
restrictions  in  nearly  all,  if  not  all,  cases  apply  ostensibly  to  all 
foreigners;  and  so  far  as  the  United  States  is  concerned  they  amount 
to  discriminations  only  in  the  sense  that  citizens  of  this  country 
are  not  accorded  the  same  rights  in  these  foreign  countries  as  are 
accorded  the  citizens  of  such  foreign  countries  in  the  United  States. 
The  present  attitude  of  the  British  Government  is  described  as  fol- 
lows in  a  memorandum  prepared  by  the  British  Petroleum  Deparf- 
ment  and  issued  from  their  foreign  office  in  London  under  date  to 
April  21,   1921    (see  Exhibit  13,  p.    102):  .      ,. 

*  *  *  It  is  uvideiit  that  in  reo:ard  to  a  '  'closed  door' '  policy  no  real  parallel  can 
fairly  be  drawn  between  the  IJritish  Empire,  vith  its  small  and  scattered  production, 
and  a  country  like  the  United  States,  which  at  present  produces  two-thirds  of  the 
world's  output  within  her  home  territory.  With  no  nationality  restrictions  it  would 
have  been  feasible  for  an  isolated  oil  held,  such  as  Trinidad,  to  be  taken  up  by  German 
companies  and  worked  with  (ierman  personnel  with  the  result  tliat  on  the  outbreak 
of  the  war  tlie  wells  and  plant  mi*?ht  nave  been  rendered  useless  and  the  supplies  of 
oil  from  this  source  cut  off  for  montlis.  in  the  United  States,  on  the  other  hand,  the 
foreijj:n  holdings  are  bound  to  represent  only  a  small  proportion  of  the  whole,  and  can 
l)e  no  source  of  danjjer.  As  a  matter  of  fact,  the  foreign  companies  to  which  America 
has  thrown  her  fields  open  are  mostly  registered  in  America,  are  staffed  with  Americans, 
and  dispose  of  their  production  in  America. 

Although  both  Great  Britain  and  France  have  failed  to  accord 
complete  reciprocity  to  nationals  of  the  United  States  in  respect  to 
their  petroleum  deposits,  such  reciprocity  as  between  the  nationals 
of  those  two  Governments  appears  to  have  been  established  by  the 
San  Remo  agreement,  signed  April  24,  1920.  (See  Exhibit  14,  p.  103.) 
This  agreement  referred  specifically  to  the  acquisition  of  petroleum 

groperty  in  Rumania,  Asia  Minor,  territories  of  the  former  Russian 
Impire,  Galicia,  the  French  colonies,  and  the  colonies  of  the  British 
Crown,  and  provided,  among  other  things,  that  both  Governments 
would  lend  their  aid  to  their  respective  dependents  in  negotiations 
with  the  Rumanian  Government  in  respect  to  petroleum  rights  and 
in  their  common  efforts  to  obtain  petroleum  concessions  in  tne  terri- 
tories of  the  former  Russian  Empire.  Regarding  former  enemy 
concessions,  it  provided  that — 

All  shares  belo:iging  to  former  eiemy  concessions  of  which  one  may  gain  possession 
and  all  other  advantages  drawn  from  these  negotiations  will  be  divided  on  the  basis 
of  50  per  cent  to  British  intere.^ts  and  50  per  cent  to  French  interests. 


I 


r 


i 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


41 


Regarding  the  petroleum  deposits  of  Mesopotamia,  the  San  Remo 
agreement  provided  that — 

The  British  Government  binds  itself  to  concede  to  the  French  Government  or  the 
representative  appointed  by  same,  25  per  cent  of  the  net  production  of  crude  oil  at 
the  current  market  price  which  H.  B.  M.  Government  may  draw  from  the  Meso- 
potamia petroleum  regions,  *  *  *  or  in  the  event  the  Government  has  recourse 
to  a  private  company  to  exploit  the  Mesopotamia  petroleum  regions,  the  British  Gov- 
ernment will  place  at  the  disposal  of  the  French  Government  a  participation  of  25 
per  cent  in  the  said  company. 

The  French  Government  in  turn  agreed  to — 

*  *  *  accord  facilities  to  any  British  group  or  groups  of  good  standing  which  can 
offer  the  necessary  guarantee,  which  will  operate  m  conformity  with  French  legisla- 
tion, for  the  acquisition  of  petroleum  concessions  in  the  colonies  of  France,  or  in 
French  protectorates  or  zones  of  influence,  including  Algeria,  Tunis,  and  Morroco. 
It  is  well  to  point  out  that  the  French  Parliament  has  decided  that  groups  formed 
under  these  conditions  are  obliged  to  contain  at  least  67  per  cent  French  interests. 

The  San  Remo  agreement  also  provided  that — 

As  far  as  the  existing  regulations  will  permit  the  British  Government  will  accord 
to  the  French  dependents  who  may  desire  to  explore  and  exploit  petroleum  regions 
in  the  Crown  colonies,  advantages  corresponding  to  those  France  has  accorded  to 
British  subjects  in  the  French  colonies. 

On  August  10,  1920,  the  tripartite  agreement  between  Great 
Britain,  France,  and  Italy,  in  respect  to  the  Turkish  Empire,  was 
signed.     By  this  agreement  the  signatories  undertook  to — 

render  diplomatic  support  to  each  other  in  maintaining  their  respective  positions  in 
the  areas  in  which  their  special  interests  are  recognized. 

Article  X  of  this  agreement  provided  that  nothing  in  the  agrees 
ment  shall  prejudice  the  rights  of  nonsignatory  nations  to  free  acces- 
to  the  various  areas  for  commercial  and  economic  purposes.  Repre- 
sentations have  been  made  by  the  United  States  Government  to  the 
British  Government  in  respect  to  American  participation  in  the  ex- 
ploitation of  Mesopotamia  oil  fields.  In  the  memorandum  issued  by 
the  British  foreign  office  under  date  of  April  21,  1921,  it  is  stated 
that— 

The  whole  question  of  Mesopotamia,  which  has  been  fully  dealt  with  in  correspond- 
ence with  the  United  States  Government,  need  not  be  referred  to  here  beyond  saying 
that  while  there  is  no  intention  of  discriminating  against  non-B  ritish  interests,  account 
must  be  taken  of  legitimate  rights  acquired  before  the  war,  and  this  applies  equally 
to  Palestine,  where  American  claims  are  understood  to  exist. 

The  efforts  of  the  United  States  Government  with  respect  to 
participation  of  domestic  oil  companies  in  the  acquisition  of  petroleum 
rights  m  Mesopotamia  appear  to  have  been  successful,  as  indicated 
by  a  London  dispatch  of  October  18,  1922.     (See  p.  16.) 

The  Government  of  the  Netherlands  has  not  granted  nationals  of 
the  United  States  the  same  privileges  in  the  Dutch  East  Indies  as 
those  enjoyed  by  citizens  of  the  Netherlands  in  this  country.  The 
only  known  American  interest  in  the  petroleum  industry  of  the 
Netherlands  East  Indies  at  the  present  time  is  that  of  the  Neder- 
landsche  Koloniale  Petroleum  Maatschappij,  a  Dutch  company, 
subsidiary  of  the  Standard  Oil  Co.  (New  Jersey).  Even  the  rights 
of  this  company  were  not  acquired  in  the  first  instance  from  the 
Government,  but  from  third  parties,  and  they  are  said  to  be  of  little 


35904—23- 


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1^^*^ 


» >'««'k^.  --aaaeuwu*  -g^^-; u wt^atuiiatAi  »i»- 


40 


FOREIGN    OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


voked,  and  lie  was  informed  that  the  Government  of  India  did  not 
desire  ''  to  introduce  any  American  oil  companies  or  their  subsidiaries 
into  Burma." 

According  to  the  hi  test  available  information  the  policy  of  the 
Government  of  India  with  respect  to  foreign  participation  in  the 
development  of  its  petroleum  resources  has  not  been  modified.  The 
opposition  to  American  companies  was  not  limited  to  the  acquisition 
or  development  of  oil  lands,  but  extended  to  the  ownership  of  refining 
and  distributing  facilities.  For  example,  the  Standard  Oil  Co.  of 
New  York  states  it  was  not  allowed  to  purchase  a  warehouse  site 
in  Burma.     (See  p.  44.) 

The  foregoing  snows  the  attitude  of  the  British  Government  during 
the  early  history  of  the  petroleum  industry.  Subsequent  events 
have  indicated  a  continuance  on  the  part  of  Great  Britain  and  British 
colonies  of  policies  of  restriction  upon  foreigners  in  respect  to  the 
development  and  exploitation  of  some  of  their  most  promising  oil 
areas.  Such  restrictive  policies  are  followed  not  only  by  the  British 
Empire,  but  by  the  Netherlands,  France,  and  other  countries.  These 
restrictions  hi  nearly  all,  if  not  all,  cases  apply  ostensibly  to  all 
foreigners;  and  so  far  as  the  United  States  is  concerned  they  amount 
to  discriminations  only  in  the  sense  that  citizens  of  this  country 
are  not  accorded  the  same  rights  in  these  foreign  countries  as  are 
accorded  the  citizens  of  such  toreign  countries  in  the  United  States. 
The  present  attitude  of  the  British  Government  is  described  as  fol- 
lows in  a  memorandum  prepared  by  the  British  Petroleum  Deparf- 
ment  and  issued  from  their  foreign  office  in  London  under  date  to 
April  21,   1921    (see  Exhibit  13,  p.    102):  ,      ^ 

*  *  *  It  is  evident  tliat  in  regard  to  a  "  'closed  door' '  policy  no  real  parallel  can 
fairly  be  drawn  between  the  British  Empire,  with  its  small  and  scattered  production, 
and  a  country  like  the  United  States,  which  at  present  produces  two-tliirds  of  the 
world  *s  output  within  her  home  territory.  With  uo  nationality  restrictions  it  would 
have  been  feasible  for  an  isolated  oil  field,  such  as  Trinidad,  to  be  taken  up  by  German 
companies  and  worked  vvith  (ierman  personnel  with  the  result  tliat  on  the  outbreak 
of  the  war  the  wells  and  plant  mi»j:ht  have  been  rendered  useless  and  the  supplies  of 
oil  from  this  source  cut  off  for  mouths.  In  the  Uniied  States,  on  the  other  hand,  the 
foreign  holdings  are  bound  to  represent  only  a  small  proportion  of  the  whole,  and  can 
be  no  source  of  danjjer.  As  a  matter  of  fact,  the  forei^i  companies  to  which  America 
has  thrown  her  fields  open  are  mostly  registered  in  America,  are  staffed  with  Americans, 
and  dispose  of  their  production  in  America. 

Although  both  Great  Britain  and  France  have  failed  to  accord 
complete  reciprocity  to  nationals  of  the  United  States  in  respect  to 
their  petroleum  deposits,  such  reciprocity  as  between  the  nationals 
of  those  two  Governments  appears  to  have  been  established  by  the 
San  Remo  agreement,  signed  April  24,  1920.  (See  Exhibit  14,  p.  103.) 
This  agreement  referred  specifically  to  the  acquisition  of  petroleum 
property  in  Rumania,  Asia  Minor,  territories  of  the  former  Russian 
Empire,  Galicia,  the  French  colonies,  and  the  colonies  of  the  British 
Crown,  and  provided,  among  other  things,  that  both  Governments 
would  lend  tlieir  aid  to  their  respective  dependents  in  negotiations 
with  the  Rumanian  Government  in  respect  to  petroleum  rights  and 
in  their  common  efforts  to  obtain  petroleum  concessions  in  the  terri- 
tories of  the  former  Russian  Empire.  Regarding  former  enemy 
concessions,  it  provided  that — - 

All  sliares  belo.iging  to  former  eiemy  concessions  of  which  one  may  giiin  possession 
and  all  other  advantages  drawn  from  these  negotiations  will  be  divided  on  the  basis 
of  50  per  cent  to  British  intere.^t8  and  60  per  cent  to  French  interests. 


^  A  Jk 


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^k^.^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


4] 


Regarding  the  petroleum  deposits  of  Mesopotamia,  the  San  Remo 
agreement  provided  that — 

The  British  Government  binds  itself  to  concede  to  the  French  Government  or  the 
representative  appointed  by  same,  25  per  cent  of  the  net  production  of  crude  oil  at 
the  current  market  price  which  H.  B.  M.  Government  may  draw  from  the  Meso- 
potamia petroleum  regions,  *  *  *  or  in  the  event  the  Government  has  recourse 
to  a  private  company  to  exploit  the  Mesopotamia  petroleum  r^ons,  the  British  Gov- 
ernment will  place  at  the  disposal  of  the  French  Government  a  participation  of  25 
per  cent  in  the  said  company. 

The  French  Government  in  turn  agreed  to — 

*  *  *  accord  facilities  to  any  British  group  or  groups  of  good  standing  which  can 
offer  the  necessary  guarantee,  which  will  operate  m  conformity  with  French  legisla- 
tion, for  the  acquisition  of  petroleum  concessions  in  the  colonies  of  France,  or  in 
French  protectorates  or  zones  of  influence,  including  Algeria,  Tunis,  and  Morroco. 
It  is  well  to  point  out  that  the  French  Parliament  has  decided  that  groups  formed 
under  these  conditions  are  obliged  to  contain  at  least  67  per  cent  French  interests. 

The  San  Remo  agreement  also  provided  that — 

As  far  as  the  existing  regulations  will  permit  the  British  Government  will  accord 
to  the  French  dependents  who  may  desire  to  explore  and  exploit  petroleum  regions 
in  the  Crown  colonies,  advantages  corresponding  to  those  France  has  accorded  to 
British  subjects  in  the  French  colonies. 

On  August  10,  1920,  the  tripartite  agreement  between  Great 
Britain,  France,  and  Italy,  in  respect  to  the  Turkish  Empire,  was 
signed.    By  this  agreement  the  si^atories  undertook  to — 

render  diplomatic  support  to  each  other  in  maintaining  their  respective  positions  in 
the  areas  m  which  their  special  interests  are  recognized. 

Article  X  of  this  agreement  provided  that  nothing  in  the  agrees 
ment  shall  prejudice  the  rights  of  nonsignatory  nations  to  free  acces- 
to  the  various  areas  for  commercial  and  economic  purposes.  Repre- 
sentations have  been  made  by  the  United  States  Government  to  the 
British  Government  in  respect  to  American  participation  in  the  ex- 
ploitation of  Mesopotamia  oil  fields.  In  the  memorandum  issued  by 
the  British  foreign  office  under  date  of  April  21,  1921,  it  is  stated 
that — 

The  whole  question  of  Mesopotamia,  which  has  been  fully  dealt  with  in  correspond- 
ence with  the  United  States  Government,  need  not  be  referred  to  here  beyond  saying 
that  while  there  is  no  intention  of  discriminating  against  non-British  interests,  account 
must  be  taken  of  legitimate  rights  acquired  before  the  war,  and  this  applies  equally 
to  Palestine,  where  American  claims  are  understood  to  exist. 

The  efforts  of  the  United  States  Government  with  respect  to 
participation  of  domestic  oil  companies  in  the  acquisition  of  petroleum 
rights  m  Mesopotamia  appear  to  have  been  successful,  as  indicated 
by  a  London  dispatch  of  October  18,  1922.     (See  p.  16.) 

The  Government  of  the  Netherlands  has  not  granted  nationals  of 
the  United  States  the  same  privileges  in  the  Dutch  East  Indies  as 
those  enjoyed  by  citizens  of  the  Netherlands  in  this  country.  The 
only  known  American  interest  in  the  petroleum  industry  of  the 
Netherlands  East  Indies  at  the  present  time  is  that  of  the  Neder- 
landsche  Koloniale  Petroleum  Maatschappij,  a  Dutch  company, 
subsidiary  of  the  Standard  Oil  Co.  (New  Jersey).  Even  the  rights 
of  this  company  were  not  acquired  in  the  first  instance  from  the 
Government,  but  from  third  parties,  and  they  are  said  to  be  of  little 

35904—23 5 


\>:^ 
'*i\ 


.t»  --^Mi^'-r"!^ 


''t*jmm  «m,-mxsmm'->'r^-' 


•?r'  mr 


hi'. 


42 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


commercial  value.     The  Standard  Oil  Co.  (New  Jersey),  under  date 
of  August  4,  1922,  states  (see  Exhibit  18,  p.  125): 

Practically  we  have  found  a  diBcrimination  in  the  Dutch  East  Indies  ^inst 
American  capital  through  the  refusal  of  the  government  of  the  Dutch  East  Indies  to 
grant  prospecting  licenses  to  the  Nederlandsche  Koloniale  Petroleum  Maatechappii, 
or  to  grant  mining  concessions  except  in  cases  where  the  Nederlandsche  Koloniale 
Petroleum  Maatschappij  had  a  right  to  such  concessions  under  the  provisions  of  the 
old  mining  law  which  provided  that  discovery  of  a  mineral  under  a  prospecting  license 
gave  the  right  to  a  concession.  That  mining  law  has  been  abrogated  and  a  new  law 
passed  which  leaves  the  granting  of  concessions  to  the  discretion  of  the  governor 
general.  All  the  concessions  granted  to  the  Nederlandsche  Koloniale  Petroleum 
Maatschappij  were  granted  under  the  old  law  on  rights  secured  as  a  result  of  the  dis- 
covery of  the  mineral  on  prospecting  licenses  granted  to  third  parties  and  purchased 
by  the  Nederlandsche  Koloniale  Petroleum  Maatschappij. 

The  failure  of  the  Netherlands  to  accord  to  nationals  of  the  United 
States  the  same  opportunities  in  the  Dutch  East  Indies  as  are  accorded 
Dutch  nationals  in  the  United  States  has  been  the  subject  of  extensive 
correspondence  between  the  Governments  of  the  two  nations,  par- 
ticularly with  reference  to  the  Djambi  concession.*     (See  p.  54.) 

Discrimination  by  foreign  governments  against  nationals  of  the 
United  States  in  the  acquisition  and  development  of  petroleum- 
producing  properties  may  oe  grouped  under  three  kinds,  viz,  legis- 
lative, contractual,  and  administrative.  The  first  is  illustrated  by 
the  French  parliamentary  requirements  which,  according  to  the  San 
Kemo  agreement,  requires  that  at  least  67  per  cent  be  French  interests. 
The  contractual  form  of  discrimination  is  illustrated  by  the  San 
Remo  agreement.  (See  p.  103.)  The  administrative  restriction  is  well 
illustrated  by  the  practice  of  the  Government  of  British  India. 

Section  4.  British  restrictions. 

Crude  petroleum  has  been  discovered  in  Great  Britain  and  in  a 
number  of  British  possessions,  some  of  which  are  self-governing; 
consequently  there  is  considerable  diversity  in  the  laws  and  admin- 
istrative practice  in  different  parts  of  the  British  Empire.  In  order 
to  present  clearly  the  facts  in  respect  to  the  different  parts  of  the 
British  Empire,  each  important  petroleum  producing  dependency  is 
discussed  separately. 

The  United  Kingdom. — ^According  to  a  dispatch  from  the  British 
Government  to  the  British  ambassador  at  Washington  (see  Exhibit 
13,  p.  101)— 

There  is  no  ban  whatever  on  the  exploitation  of  possible  oil-bearing  lands  by- 
foreigners  or  foreign  companies.  A  regulation,  which  was  introduced  during  the  war, 
restricting  the  participation  of  foreigners  in  British  oil  undertakings  has  been  with- 
drawn. As  already  explained,  the  total  output  of  oil  products  in  Great  Britain 
is  less  than  170,000  tons.  To  secure  165,000  tons  from  the  Scotch  shale  fields,  it  is 
necessary  to  mine  3,000,000  tons  of  shale  and  to  employ  10,000  men,  and  the  high 
costs  have  requently  menaced  the  existence  of  the  industry. 

A  letter  to  the  commission  from  the  Standard  Oil  Co.  (New  Jersey), 
dated  August  4,  1922,  also  states  that — 
At  present  there  is  no  restriction  on  foreign  interests  in  the  United  Kingdom. 

British  India. — The  reserves  of  petroleum  in  British  India  have 
been  roughly  estimated  by  the  United  States  Geological  Survey  at 

•  Comraunications  between  the  two  Governments  on  the  Djambi  concession  are  set  forth  in  Senate  Docu- 
ments No.  11  and  No.  39,  Sixty-seventh  Congress,  first  session. 


Ill 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


43 


nearly  1,000,000,000  barrels.  The  most  important  producing  region 
is  that  of  Burma,  which  furnished  nearly  98  per  cent  of  the  1918 
production.  Assam  also  produces  crude  petroleum  and  indications 
look  favorable  for  the  opening  of  new  fields  in  Punjab,  Jammu 
Province,  and  Baluchistan.  According  to  the  petroleum  department 
of  the  British  Government,  the  country  s  production  is  about  8,400,000 
barrels  per  annum,  which  is  insufficient  for  domestic  needs,  and  large 

?uantities  are  imported  from  the  United  States  and  the  Dutch  East 
ndies,  and  some  from  Persia. 
.^    So  far  as  known  no  American  company  owns  oil-producing  property 
in  India.     The  British  Government,  under  date  of  April  21,   1921 
(see  p.  101),  stated  that — 

Prospecting  or  mining  leases  have  been,  in  practice,  granted  only  to  British  subjects 
or  to  companies  controlled  by  British  subjects. 

Apparently  the  sale  of  concessions  or  leases  to  foreigners  is  also 
prohibited,  and,  as  stated  in  Senate  Document  11,  Sixty-seventh 
Congress,  first  session: 

In  the  case  of  the  death  of  the  person  or  any  of  the  persons  to  whom  the  license  or 
lease  has  been  granted  it  shall  inure  for  the  benefit  of  his  legal  representatives  only  if 
they  are  British  subjects  or  a  company  or  firm  shown  to  the  satisfaction  of  the  local 
government  to  be  controlled  by  British  subjects. 

The  American  consular  representative  in  India  recently  reported 
that  the  attitude  of  the  Government  of  British  India  with  respect  to 
petroleum  concessions  in  Burma  has  been  *'one  of  entire  exclusive- 
ness."  In  this  connection  it  is  interesting  to  note  that  the  Shell 
Transport  &  Trading  Co.  (Ltd.)  was  not  granted  a  concession  in 
Burma.  Under  date  of  March  10,  1906,  the  London  Petroleum  Re- 
view stated : 

For  the  past  two  years  a  steady  yet  continuous  agitation  has  been  proceeding  from 
two  distinct  quarters— the  Standard  Oil  Co.  and  the  Shell  Transport  &  Trading  ('O.— 
in  order  that  both  concerns  might  obtain  redress,  either  by  the  abolition  of  the  duty 
in  India  or  through  being  granted  facilities  for  exploration  in  Burma  equivalent  to 
those  given  to  the  Burma  Oil  Co.  On  behalf  of  the  former  companv,  Mr.  Libby 
energetically  pushed  the  matter  forward,  while  for  the  Shell  Sir  Marcus  Samuel  car- 
ried on  a  most  spirited  attack. 

It  has  been  stated  that  the  reason  the  Shell  Co.  was  excluded  from 
India  was  because  the  Government  of  India  believed  there  was  an 
alliance  between  that  company  and  the  Standard  Oil  Co.  On  June 
17,  1914,  Samuel  Samuel,  now  a  managing  director  of  the  Shell 
Transport  &.  Trading  Co.,  made  the  following  statement  in  the  Brit- 
ish House  of  Commons  in  discussing  conditions  in  1903: 

The  Burma  Oil  Co.  went  to  the  Indian  Government  and  led  it  to  believe  there  was 
a  comlnnation  between  the  Standard  Oil  Co.  and  the  Shell  Co.  to  crush  them  out  of 
existence.  The  Indian  Government  of  the  day  believed  that  this  state  of  affairs 
existed,  went  to  the  assistance  of  the  Burma  Oil  Co.,  and  put  a  duty  on  the  importa- 
tion of  petroleum  into  British  India,  which  created  the  first  monopoly  that  was  created 
in  the  oil  trade.  *  *  *  I  admire  the  Government  of  India  for  having  protected 
that  industry,  and  thereby  being  the  means  of  creating  a  strong  and  powerful  com- 
pany. 

That  the  policv  of  exclusion  in  Burma  was  strictly  adhered  to 
in  later  years  is  illustrated  by  a  letter  furnished  the  commission  by 
C.  F.  Meyer,  vice  president  of  the  Standard  Oil  Co.  of  New  York. 
(See  Exhibit  15,  p.  105.)     This  letter  was  written  by  the  Standard 


I 


1    >'"l»'»..   «KSE*f»»'-»-*«»*««i8»<»!aA»Wb- 


44  FOREIGN   OWNERSHIP   IN   THE  PETROLEUM  INDUSTRY. 

Oil  Co.  of  New  York  to  the  Secretary  of  State  at  Washington,  under 
date  of  February  24,  1922,  and  stated  in  part  as  follows: 

On  March  20,  1902,  the  Colonial  Oil  Co.  of  New  Jersey  (a  subsidiary  of  the  Standard 
Oil  Co.,  New  Jersey)  applied  to  the  government  of  Burma  for  a  license  to  prospect 
for  oil  in  upper  Burma.  The  application  was  made  m  due  conformity  with  the  local 
government  laws  and  requirements  in  that  country  relative  to  prospecting  hcenses. 
This  application  was  refused  on  June  9,  1902,  by  the  local  government  of  Burma 
under  instructions  from  the  Viceroy  of  India,  Lord  Curzon,  and  no  reason  whatever 

was  assigned  for  the  refusal.  .      ,.  i-  j  r  i  ^ 

On  Jmie  13, 1902,  similar  permission  for  a  prospecting  hcense  was  applied  for  on  be- 
half of  the  Anglo-American  Oil  Co.  (Ltd.),  a  British  corporation  re-istored  in  1888. 
In  addition  to  n  aldng  application  for  a  license  to  prospect  for  oil,  and  without  knowl- 
edge of  anv  Government  policy  of  discrimination,  negotiations  were  entered  into 
with  native' owners  of  freehold  property  for  the  development  of  their  land  ™r  to 
receipt  of  the  official  reply  to  the  Anglo-American  Oil  Co.  s  application  Mr.  W.  H. 
Libby,  representing  the  Standard  Oil  Co.,  appealed  to  the  viceroy  of  India  for  favor- 
able consideration  of  the  application.  Mr.  libby  also  invoked  the  aid  of  General 
Patterson,  then  United  States  consul  general  in  India,  in  the  presentation  of  the  case 
to  the  viceroy.  In  replv  to  a  request  made  by  General  Patterson  for  an  interview  with 
the  viceroy,  the  Hon.  W.  Lawrence,  private  secretary  to  the  \iceroy,  wrote  under  date 
of  October  2,  1902,  that  he  was  directed  to  say: ,.         .        ^  ,  .u     k        •«„« 

"It  is  not  desired  bv-the  Government  of  India  to  introduce  any  of  the  xVmerican 
oil  companies,  or  their'subsidiary  companies,  into  Burma,  and  that  an  interview  with 
the  viceroy  would  not  be  attended  A\^th  any  other  result." 

On  October  2  1902,  the  local  government  of  Burma  issued  an  order  prohibiting 
private  owners  of  land  in  upper  Burma  from  disposing  of  their  land  to  any  party  not 
first  approved  by  the  government.  This  order  was  issued  at  the  instance  of  the  govern- 
ment of  India.  On  October  17,  1902,  the  application  of  the  Anglo-American  Oil  Co. 
was  refused  by  the  government  of  Burma  without  any  reason  being  assigned .  Kepre- 
sentations  backed  bv  the  force  of  the  United  States  Ciovernment  through  its  ainbas- 
sador  in  London— who  at  that  time  was  J.  H.  Choate— were  then  made  to  the  British 
Government  authorities  in  London.  The  British  Foreign  Office  replied  that  the  gov- 
ernment of  India  was  not  influenced  in  its  decision  by  the  fact  that  the  applicant  was 
an  American  company;  that  the  decision  was  given  after  due  consideration  had  been 
paid  to  the  special  conditions  of  oil  production  in  Burma,  and  after  the  government  s 
policy  had  been  deliberatelv  adopted.  They  claim  that  the  government  of  India, 
{)einc'  the  sole  proprietor  of  the  mineral  wealth  of  the  country  throughout  the  greater 
part  of  India,  are  in  a  different  position  from  that  of  most  other  governments,  and  have, 
consequently,  to  exercise  a  large  discriminatory  power  in  dealing  with  applications 

for  concessions. 

*  ♦  »  ♦  ♦  ♦  *       _ 

On  February  27,  1905,  we  applied  for  permission  to  erect  tanks  for  the  storage  of  oil 
in  Burma,  and  on  April  17,  1905,  we  also  made  the  customary  local  application  for  per- 
mission to  construct  a  refinerv.  It  was  our  intention  to  use  these  facilities  for  the  stor- 
ino-  and  refining  of  crude  oifto  be  purchased  from  the  many  large  and  small  native 
producers.  Both  of  these  applications  were  refused  May  22,  1905,  without  any  reason 
being  assigned.    We  appealed  against  this  decision  to  the  Government  of  India,  but  our 

appeal  was  of  no  avail. 
^      *  *  ♦  ♦  *  ♦  ♦ 

The  Indian  Government  Gazette  of  March  6,  1915,  contains  an  account  of  an  inter- 
rogation made  by  one  of  the  Indian  members  of  the  Indian  council  and  the  reply 
thereto  by  the  government  secretary.  In  reply  to  the  request  by  Sir  J^azulbhoy 
Currimbhoy  that  the  government  lay  on  the  table  the  papers  in  relation  to  the  poUcy 
of  the  government  regarding  concessions  in  respect  of  oil  fields,  the  Hon.  Mr.  tlark 

said* 

"The  papers  relating  to  the  policy  of  the  government  regarding  concessions  in  respect 
of  oil  fields  are  confidential,  and  I  regret  that  they  can  not  therefore  be  laid  on  the  table. 
Oil-winning  concessions  are  granted  under  the  mining  rules  of  India,  but  petroleum 
is  included  in  what  is  known  as  the  reserved  list  of  minerals,  concessions  for  which, 
as  being  resources  of  national  importance,  are  only  granted  to  British  subjects  and  to  ^ 
companies  mainly  British  in  constitution." 

The  policy  of  exclusion  was  not  confined  strictly  to  Burma,  but,  it 
appears,  was  extended  to  other  parts  of  India  which  showed  promise 
of  petroleum  production.  The  alacrity  with  which  the  local  govern- 
ment of  India  remedies  any  deficiency  in  the  law  of  exclusion,  even  in 


\ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


45 


respect  to  private  property,  is  illustrated  by  the  following  extract  from 
the  above-mentioned  communication  of  the  Standard  Oil  Co.  of  New 
York  in  respect  to  Assam : 

Early  in  1917  one  of  our  representatives  visited  Sylhet,  in  Assam,  India,  and  obtained 
an  option  expiring  November  15,  1917,  to  purchase  or  lease  land  and  mineral  rights- 
from  private  owners  of  freehold  property.  It  was  discovered  by  our  representative- 
that  in  Sylhet  most  of  the  land  had  been  settled  under  what  is  known  as  the  "per- 
manent settlement"  tenure,  and  which  conveyed  absolute  title  to  both  the  surface 
and  underground  rights.  On  July  6,  1917,  our  representative  registered  with  the 
local  authorities  an  agreement  to  lease  the  private  property  secured  under  the  option 
referred  to  above  for  the  purpose  of  prospecting  for  oil.  We  were  blocked  in  thiff^ 
effort  to  secure  a  foothold  by  a  new  regulation  of  the  government  of  India,  No.  11917,- 
dated  October  6,  and  published  in  the  official  Assam  Gazette  on  October  24,  1917. 
This  regulation  prohibits  any  owner  from  transferring  his  interests  in  a  mine — which 
expression,  it  is  notified,  includes  any  mineral  deposits,  or  land  known  or  believed 
to  contain  a  mineral  deposit  of  commercial  value.  Thus  before  the  expiration 
date — November  15 — of  our  option  on  the  Sylhet  property  the  government  of  India, 
by  its  regulation  No.  11917,  stepped  in  to  prevent  the  transfer  to  us  of  the  petroleum 
or  mineral  rights  on  that  private  property. 

A^ain,  in  respect  to  the  State  of  Kashmir,  the  communication 
states : 

The  form  of  prospecting  license — received  Ijy  us  in  April,  1921 — issued  by  the 
native  State  of  Kashmir,  situated  on  the  northwest  frontier  of  India,  and  which  is 
subject  to  administrative  direction  and  supervision  of  the  government  of  India, 
bears  the  following  words: 

"The  licensees  shall  at  all  times  during  the  said  term  remain  or  be  British  or  State 
subjects  or  a  company  or  corporation  of  British  or  State  subjects.  The  chairman 
or  president  or  other  persons  occupying  that  or  any  other  similar  position  (it  any) 
and  the  managing  director  (if  any)  and  the  majority  of  the  other  directors  (if  any) 
shall  be  I3ritish  or  State  subjects. " 

The  Federated  Malay  States. — The  United  States  consul  gen- 
eral at  Singapore  reported,  under  date  of  November  12,  1919,  that 
apparently,  so  far  as  the  local  government  was  concerned,  there 
were  no  restrictions  regarding  the  acquisition  of  petrolemn  rights 
by  aliens,  but  that  grants  to  mineral  rights,  which  included  petro- 
leum, were  subject  to  the  approval  of  the  British  Government. 

Australia. — Except  for  certain  small-scale  working  of  shale  no 
petroleum  is  produced  in  Australia;  although  the  possibilities  for 
future  production  are  admitted,  they  are  not  as  3^et  regarded  as 
very  promising.  The  war  precautions  act  and  amendments, 
1914-1916,  provided  that  no  contract  for  the  acquisition  of  any 
mining  business,  or  of  any  interests  in  such,  or  of  any  security  issued 
by  a  mining  company  should  be  made  by  any  other  than  a  natural- 
born  British  subject  without  the  written  consent  of  the  attorney 
general.' 

In  1921  the  British  Foreign  Office,  in  referring  to  Australia  and 
other  British  colonies,  stated  that: 

In  none  of  these  Dominions  is  there  at  present  any  general  prohibition  of  the  exploi- 
tation of  oil  lands  by  foreigners,  thouijh  in  certain  of  the  Australian  States  regulations 
introduced  during  the  war  confined  the  issue  of  mining  leases  to  British  subjects. 

Northern  and  Western  Australia. — The  mineral-oil  ordinance, 
1913,  of  the  northern  territory  of  Australia  (including  Papua)  pro- 
vided that® — 

A  license  under  this  ordinance  or  a  mineral-oil  lease  shall  not  l)e  granted  to  any 
company  other  than  a  company  formed  and  incorporated  under  the  law  of  the  United 
Kingdom  or  a  British  possession. 


I  S.  Doc.  272,  66th  Cong.,  2d  sess.,  p.  5. 


« S.  Doc.  11,  67th  Cong.,  1st  sess.,  p.  5. 


r  A.:,i*im'tnm»fm^  ^m-- 


^  *««»Cl«**4»  A*  Si.- 


46 


FOREIGN   OWNERSHIP  IX   THE  PETROLEUM   INDUSTRY. 


A  foreign  company  shall  not  directly  or  indirectly  l)e  capable  of  a(;qiiirinj?  or  hold- 
in":  a  inineral-oii  lease  or  any  interest  therein,  whether  legal  or  equitable. 

The  lessee  under  a  mineral-oil  lease  shall  not,  withoiit  the  consent  of  the  director 
of  mines,  be  entitled  to  assign  or  transfer  the  lease  to  any  company  not  l)eing  a  com- 
pany formed  within  the  Commonwealth. 

The  ordinance  also  provided  that  a  mineral-oil  lease  should  con- 
tain— 

A  covenant  bv  the  leasee  to  refine  all  crude  oil  produced  by  the  lessee  in  the  northern 
territory  or  in  some  part  of  Australia  approved  of  for  that  purpose  by  the  minister. 

A  covenant  by  the  lessee  not  to  ship  or  export  any  crude  oil  tp  any  place  outside 
Australia  without  the  consent  of  the  minister. 

In  1921  the  British  Foreign  Office  stated  (see  Exhibit  13,  p.  101): 

In  the  northern  territory  of  Australia  leases  are,  as  in  Canada,  restricted  to  British 
registered  companies. 

Provisions  similar  to  those  of  the  northern  territory  occur  in  the 
mining  act  of  Western  Australia. 

Government  activity  in  Papua. — The  Australian  and  British 
Imperial  Governments  agreed,  on  July  7,  1919,  to  provide  in  equal 
shares  a  fund  of  not  to  exceed  £500,000  for  exploration  work  in 
Papua,  a  part  of  Now  Guinea,  to  be  conducted  by  the  Anglo-Persian 
Oil  Co.  This  apparently  was  an  exclusive  right  to  prospect  in  that 
territory.  It  was  stated  in  the  House  of  Commons  on  March  8,  1921, 
that  the  British  Government  had  withdrawn  from  this  agreement. 
The  British  Foreign  Office  stated,  in  1921  (see  Exhibit  13,  p.  101) 
that — 

Exploration  is  bein<,'  carried  on  in  Papua  on  behalf  of  the  Imperial  and  Australian 
Governments,  but  so  far  without  definite  result. 

Queensland. — The  mining  law  of  Australia  pro vides  that  petro- 
leum on  or  below  the  surface  of  all  land  in  Queensland,  whether 
alienated  in  fee-simple  or  not  so  alienated  from  the  Crown,  and  if 
so  alienated  whensoever  alienated  is,  and  always  has  been,  the 
property  of  the  Crown.     (See  Exhibit  11,  p.  93.) 

Mandate  of  New  Guinea. — Petroleum  is  known  to  exist  in  the 
mandated  part  of  New  Guinea,  which  was  formerly  a  German  pos- 
session. Tiiat  the  Australian  Government  has  adopted  a  policy  of 
exclusion  in  the  development  of  any  oil  fields  in  the  mandated  terri- 
tory of  New  Guinea  is  indicated  by  statements  to  that  effect  issuing 
from  the  prime  minister's  office.  In  1920  the  United  States  consul 
general  at  Melbourne  reported  that  he  was  given  to  understand  posi- 
tively and  distinctly  that  while  the  administration  policy  in  regard 
to  the  mandate  of  New  Guinea  had  not  been  wholly  formulated,  it 
had  been  specifically  determined  that  aUens  would  not  be  allowed  to 
prospect  the  oil  possibilities,  and  that  any  oil  discovered  would  be 
promptly  confiscated  by  the  Government.  And  again  on  November 
29,  1921*,  he  reported  tfiat  the  authorities  had  stated  informally  that 
Australian  policy  contemplates  complete  jurisdiction  over  all  oil 
operations  in  tfie  territory  and  includes  the  exclusion  of  other 
nationals.  .  . 

That  a  policy  of  exclusion  seems  to  have  been  ahdered  to  is  indi- 
cated by  the  following  occurrence  in  the  Australian  House  of  Repre- 
sentatives on  July  24,  1922,  as  taken  from  Hansard's:* 

Senator  Lynch  asked  the  minister  representing  the  prime  minister,  upon  notice: 
Whether  the  Government  has  considered  the  advisability  of  offering  a  reward  in  a 

» Corresponds  to  the  United  States  Congressional  Record. 


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FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


47 


similar  or  modified  form,  to  that  applying  in  the  Commonwealth  for  the  discovery  of 
mineral  oil  and  petroleum  in  the  island  possessions  in  the  Pacific  under  Common- 
wealth control?  .       .  1  X    f  w 

Senator  E.  D.  Millen  (in  reply):  The  Government  reserves  the  right  of  searching 
for  mineral  oils  and,  therefore,  it  is  not  proposed  to  offer  any  reward  to  private  pros- 
pectors. 

The  Anglo-Persian  Oil  Co.  has  prospected  at  its  own  cost  in  the 
mandated  territory.  On  May  29,  1920,  this  company  entered  into 
an  agreement  with  the  Commonwealth  of  Austialia  by  the  terms 
of  which  a  refining  company  should  be  estabUshed  in  Australia  to  be 
owned  and  controlled  jointly  by  the  Government  and  the  Anglo- 
Persian  Oil  Co.,  the  Austrahan  Government  binding  itself  to  furnish 
200,000  tons  (1,400,000  barrels)  of  'indigenous  oil,"  which,  by  the 
terms  of  the  agreement,  included  oil  from  any  place  over  which 
AustraUa  has  a  mandate.  The  agreement  specified  that  the  company 
should  always  remain  an  independent  British  business;  also,  that^° — 

In  order  to  insure  the  full  success  and  development  of  the  oil-refining  industry 
in  Australia  the  Commonwealth  will,  so  long  as  the  prices  charged  by  the  refinery 
company  for  products  of  refining  are  considered  by  the  Commonwealth  fair  and 

(a)  Exercise  or  cause  to  be  exercis3d  such  statutory  and  administrative  powers  as 
it  deems  advisable  to  prevent  dumping  and  unfair  competition  by  importers  of 
refined  oil  from  other  countries. 

(6)  Refund  to  tho  refinery  company  any  customs  duty  paid  by  the  refinery  com- 
pany upon  the  imoortation  into  Australia  of  crude  mineral  oil  purchased  from  the 
oil  companv  and  refined  in  Australia  by  the  refinery  company;  and 

(c)  Cause  to  be  introduced  into  the  Parliament  of  the  Commonwealth  and  sup- 
ported as  a  Government  measure  a  bill  providing  for  the  imposition  of  customs  duties 
on  crude  mineral  oil  whenever  in  its  opinion  such  action  is  necessary  or  advisable 
to  prevent  unfair  competition  with  the  products  of  crude  oil  refined  m  Australia 
by  the  refinery  company. 

New  Zealand.— The  British  Government  officially  stated,  under 

date  of  April  21,  1921,  in  reference  to  New  Zealand  and  other  of  its 

colonies  (see  Exhibit  13,  p.  101)  that— 

In  none  of  these  Dominions  is  there  at  present  any  general  prohibition  of  the 
exploitation  of  oil  lands  by  foreigners.  *  *  *  No  important  production  has  been 
obtained  in  any  of  th?s3  countries,  though  *  *  *  a  trifling  quantity  of  oil  has 
been  obtained  in  New  Zealand. 

British  BoR^iEo.— In  1921  the  Royal  Dutch-Shell  group  had  a 

groduction  of  about  1,400,000  barrels  of  crude  petroleum  in  British 
lorneo.  This  production  was  all  obtained  in  Sarawak. 
British  North  Borneo. — ^According  to  a  memorandum  of  the  British 
foreign  office,  under  date  of  April  21,  1921,  there  is  no  production 
of  petroleum  in  British  North  Borneo,  and  there  are  no  nationaUty 
restrictions.  The  memorandum  also  states  that  ''prospecting  is 
being  carried  on  by  Japanese  and  British  companies."     (See  Exhibit 

13,  p.  102.)  . 

The  authorities  of  North  Borneo  informed  the  American  consul  at 
Singapore  on  May  25,  1920,  that  all  rights  to  prospect  for  oil  were  in 
the  hands  of  concessionaires;  and,  according  to  a  report  published  in 
1920,  a  concession  to  exploit  the  whole  of  British  North  Borneo  for 
petroleum,  running  until  1925,  was  held  by  the  British  Borneo 
retroleum  Syndicate  (Ltd.).  The  report  also  stated  that  a  subcon- 
cession,  which  appears  to  have  expired  in  August,  1921,  had  been 

w  S.  Doc.  11, 67th  Cong.,  1st  sess.,  p.  6. 


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48 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


49 


f ranted  to  the  Kuhara  Mining  Co.,  a  Japanese  concern;  and  that  in 
uly,  1918,  arrangements  had  been  made  with  D'Arcy  Exploration 
Co.  (Ltd.),  an  Anglo-Persian  company,  for  the  development  of  all  the 
Borneo  properties  with  the  exception  of  the  subconcession  to  the 
Kuhara  mining  Co.,  this  area  to  be  included  on  the  expiration  of  the 
subconcession. 

Brunei. — The  above-mentioned  memorandum  of  the  British  foreign 
office  stated  that  in  Brunei  prospecting  had  been  proceeding  for  a 
number  of  years,  but  that  no  petroleum  was  produced;  also,  that 
restrictions  generally,  similar  to  those  in  Trinidad,  were  in  force. 

Sarawak. — On  April  21,  1921,  the  British  foreign  office  stated 
that  there  were  no  nationality  restrictions  in  force  in  Sarawak.  All 
of  the  production  is  now  controlled  by  the  Royal  Dutch-Shell  group, 
and  according  to  the  1921  annual  report  of  the  Royal  Dutch  Co. — 

On  the  Miri  field  some  new  rich  areas  were  discovered,  while  the  prospects  with 
regard  to  our  exploration  on  other  anticlines  in  Sarawak  are  very  favorable. 

Restrictions  in  Africa. — Exploration  and  prospecting  work  has 
been  actively  carried  on  in  various  parts  of  Africa,  but  the  only 
section  in  which  production  was  developed  prior  to  1922  was  in 
Egypt.  In  1921  the  production  in  'Egypt  was  about  1,270,000 
barrels. 

Nigeria. — Paragraph  6,  section  2,  of  the  mineral  oils  ordinance, 
1914,  reads: 

No  lease  or  license  shall  be  ^nted  except  to  a  British  subject  or  to  a  British  com- 
pany registered  in  Great  Britain  or  in  a  British  colony  and  having  its  principal  place 
of  business  within  His  Majesty's  dominions,  the  chairman  and  the  managing  director 
(if  any)  and  the  majority  of  the  other  directors  of  which  are  British  subjects. 

The  British  foreign  office  (see  Exhibit  13,  p.  101)  stated  in  April, 
1921,  that  there  was  no  production  in  Nigeria;  that  prospecting  was 
being  done  by  two  Britisn  companies;  and  that  the  regulations  were 
similar  to  those  in  Trinidad.     (See  p.  51.) 

Gold  Coast  Colony. — According  to  the  Government  Gazette,  dated 
May  25,  1918,  section  21,  of  the  concessions  ordinance,  1900,  provides 
that"— 

(1)  No  concession  with  respect  to  mineral  oil  shall  be  granted  and  no  assignment  of 
any  such  concession  shall  be  made,  unless  the  grantee  or  assignee  shall  be  a  British 
subject  or  shall  be  a  firm,  syndicate,  or  company  which  shall  at  all  times  be  and  remain 
a  British  company,  registered  in  Great  Britain,  or  in  a  British  colony,  and  having  its 
principal  place  of  business  within  His  Majesty's  dominions,  and  the  chairman  of  the 
said  company  and  all  the  remaining  directors  shall  at  all  times  be  British  subjects, 
and  the  company  shall  not  at  any  time  be  or  become  a  corporation  directly  or  in- 
directly controlled  by  foreigners  or  foreign  corporations. 

******* 

(3)  Every  concession  and  assignment  of  a  concession  in  respect  of  mineral  oil  shall 
be  subject  to  the  approval  of  the  governor. 

(4)  If  the  grantee  of  any  such  concession  shall  assign  the  same  in  whole  or  in  part 
without  the  previous  consent  in  writing  of  the  governor,  or  if  the  grantee  or  assignee 

shall  cease  to  be  a  British  subject,  the  governor  may  thereupon  cancel  the  concession. 

*    *    '* 

In  connection  with  the  above,  the  publication  also  stated  that — 

All  persons  interested  herein  are  informed  that  for  several  years  past  it  has  been 
the  policy  of  the  Gold  Coast  Government,  a  policy  to  which  the  statutorjr  support 
above  cited  has  been  given,  to  insure  that  no  concession  with  respect  to  mineral  oil 
in  the  Gold  Coast  Colony  shall  be  granted  or  assigned  to  or  held  by  any  person  other 

"  S.  Doc.  272, 66th  Cong.,  2d  sess.,  p.  6. 


than  a  IJritish  subject,  or  by  any  syndicate,  firm,  or  company  other  than  one  of  a 
predominantly  British  character,  and  under  a  control  predominantly  British . 

Union  of  South  Africa.— In  referrmg  to  the  Union  of  South  Africa 
and  other  British  colonies,  the  British  foreign  office  states  (see 
Exhibit  13,  p.  101)  that— 

In  none  of  these  Dominions  is  there  at  present  any  general  prohibition  of  the  ex- 
ploitation of  oil  lands  by  foreigners,  *  *  *  no  important  production  has  been 
obtained  in  any  of  these  countries. 

British  East  Africa.— The  ordinance,  1912,  provides  that  ^^— 

A  prospecting  license  shall  not  authorize  a  person  who  is  not  a  British  subject  to 
peg  out  an  oil  claim. 

A  person  who  is  not  a  British  subject  shall  not  be  entitled  to  own  an  oil  claim  or 
enjoy  the  right  of  mining  for  oil  anything  in  the  ordinance  to  the  contrary  notwith- 
standing. 

*  ♦  ♦  ♦  *  ♦  * 

The  transfer  of  an  oil  claim  and  the  grant  or  transfer  of  any  share  or  interest  therein 
shall  be  invalid  unless  the  consent  in  writing  of  the  governor  to  such  transfer  or  grant 
shall  first  have  been  obtained,  and  the  transferee  or  grantee  is  a  British  subject,  or  a 
firm  or  syndicate,  all  the  members  of  which  shall  at  all  times  be  and  remain  British 
subjects,  or  a  British  company  registered  in  Great  Britain  or  in  a  British  colony  or  m 
the  protectorate  and  having  its  principal  place  of  business  within  His  Majesty's 
dominions x)r  in  the  protectorate,  and  the  chairman  of  the  said  company  and  all  the 
remaining  directors  shall  at  all  times  be  British  subjects,  and  the  company  shall  not 
at  any  time  be  or  become  a  corporation  directly  or  indirectly  controlled  by  foreigners 
or  foreign  corporations. 

No  lease  for  the  purpose  of  mining  for  mineral  oil  or  authorizing  the  lessee  to  mine 
for  mineral  oil  shall  be  granted  and  no  assignment  of  any  such  license  or  lease  shall 
be  made,  unless  the  lessee  or  assignee  shall  be  a  British  subject  or  a  firm  or  syndicate, 
all  the  members  of  which  shall  at  all  times  be  and  remain  British  subjects,  or  a  British 
companv  registered  in  Great  Britain  or  in  a  British  colony  or  in  the  protectorate  and 
having  its  principal  place  of  business  within  His  Majesty's  dominions  or  the  protecto- 
rate, and  the  chairman  of  the  said  company  and  all  the  remaining  directors  shall  at  all 
times  be  British  subjects,  and  the  company  shall  not  at  any  time  be  or  become  a  corpo- 
ration directly  or  indirectlv  controlled  by  foreigners  or  foreign  corporations. 

If  the  lessee  shall  assign  the  same  in  whole  or  in  part  without  the  previous  consent 
in  writing  of  the  governor,  or  if  the  lessee  or  assignee  shall  cease  to  be  a  British  subject, 
or  if,  where  a  firm  or  syndicate  is  the  lessee  or  assignee,  any  member  of  the  firm  or 
syndicate  shall  cease  to  be  a  British  subject,  the  governor  may  thereupon  cancel  the 
lease. 

Uganda,  and  Sormliland.— In  Uganda  prospecting  for  petroleum 
may  be  carried  on  only  in  defined  areas  and  under  special  license — ^^ 

issued  subject  to  such  restrictions,  conditions,  and  regulations  as  the  governor  may 
impose  in  each  particular  case. 

No  production  has  been  developed  in  Somaliland,  and  according  to 
the  British  Foreign  Office  (see  Exhibit  13,  p.  102)— 

Prospecting  is  being  carried  out  on  behalf  of  the  Government.  Xo  nationality 
restrictions. 

Egypt— The  British  Government  officially  stated  in  1921  that  crude 
petroleum  in  Egypt  was  all  produced  by  a  single  company  (the 
Anglo-Egyptian  OUfields  (Ltd.),  but  that  several  other  firms  were 
interested  m  prospecting  operations.  (See  Exhibit  13,  p.  102.)  The 
foreign  relations  committee  of  the  American  Petroleum  Institute 
advised  the  commission  that  the  Egyptian  Government  had  under- 
taken deep-boring  operations  with  a  definite  view  to  intensive  pro- 
duction.    (See  Exhibit  11,  p.  92.)  ___^__ 

M  S.  Doc.  272,  66th  Cong.,  2d  sess.,  pp.  S-6. 
n  S.  Doc.  272,  66th  Cong.,  2d  sess.,  p.  6. 


I 


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50 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM  INDUSTRY. 


Mesopotamia  and  Palestine. — The  title  to  all  petroleum  rights  in 
Mesopotamia  were  claimed  by  the  Turkish  Petroleum  Co.  (Ltd.),  a 
British  corporation,  the  stock  of  which  is  owned  as  follows:  Anglo- 
Persian  Oil  Co.  (Ltd.),  50  per  cent;  Royal  Dutch-Shell  interests,  25 
Eer  cent;  and  the  French  Governnient,  25  per  cent.  This  claim  was 
ased,  first,  on  what  was  known  as  the  Turkish  Petroleum  Co.  con- 
cession; and,  second,  on  the  petroleum  rights  acquired  under  what 
was  known  as  the  Bagdad  ana  Anatolian  railway  grants. 

Under  date  of  November  20,  1920,  Hon.  Bainbridge  Colby,  Secre- 
tary of  State  for  the  United  States,  in  a  note  to  Earl  Curzon,  British 
foreign  minister,  stated,  with  reference  to  the  rights  claimed  by  the 
Turkish  Petroleum  Co.  in  the  oil  fields  of  Mesopotamia: 

*  *  *  In  this  connection  I  might  observe  that  such  information  as  this  Govern- 
ment has  received  indicates  that  prior  to  the  war  the  Turkish  Petroleum  Co.,  to  make 
specihc  reference,  possessed  in  Mesopotamia  no  rights  to  petroleum  concessions  or  to 
the  exploitation  of  oil;  and  in  \'iew  of  your  assurance  that  it  is  not  the  intention  of 
the  mandatory  power  to  establish  on  its  own  behalf  any  kind  of  monopoly,  I  am  at 
some  loss  to  understand  how  to  construe  the  provision  of  the  San  Remo  agreement 
that  any  private  petroleum  company  which  may  develop  the  Mesopotamia  oil  fields 
shall  be  under  permanent  British  control.    *    *    * 

The  British  Foreign  Office  stated,  in  April,  1921,  that —    . 

The  whole  question  of  Mesopotamia,  which  has  been  fully  dealt  with  in  correspond- 
ence with  the  United  States  Goverrmient,  need  not  be  referred  to  here  beyond  sajdng 
that  while  there  is  no  intention  of  discriminating  against  non-British  interests,  account 
must  be  taken  of  legitimate  rights  acquired  before  the  war,  and  this  applies  equally 
to  Palestine,  where  American  claims  are  understood  to  exist. 

According  to  a  dispatch  from  London,  dated  October  18,  1922,  ne- 
gotiations which  were  in  progress  for  participation  by  an  American 
group  (Standard  Oil  Co.  of  New  Jersey)  was  progressing  satisfac- 
torily, although  the  exact  share  which  it  was  to  receive  had  not  been 
definitely  determined.     (See  p.  16.) 

Under  date  of  May  14,  1920,  the  United  States  State  Department 
reported  that  ^^ — 

Rich  petroleum  fiolds  are  believed  to  exist  in  certain  districts  of  Palestine.  The 
British  policy  in  this  section,  as  in  all  other  o  *cupied  areas,  seems  to  be  to  restrict 
petroleum  activities,  so  far  as  that  may  be  possible,  by  leaving  in  force  for  the  time 
being  the  re^jjulations  in  force  prior  to  the  time  of  occupation. 

British  Honduras,  British  Guiana,  and  Jamaica. — ^The  British 
Foreign  Office  in  1921  (see  p.  101)  stated  that  British  Honduras  had  no 
petroleum  production  and  no  definite  prospects,  but  that  prospecting 
applications  were  being  considered.  (See  p.  51.)  It  also  stated  that 
the  country  had  ''  similar  regulations  to  Trinidad,"  i.  e.,  no  restrictions 
in  the  case  of  private  lands,  but  lessees  of  Crown  lands  must  be  British 
subjects  or  British-controlled  companies. 

In  1921  Jamaica  had  no  production  and  there  were  no  nationality 
restrictions. 

The  regulations  in  British  Guiana  covering  petroleum  are  also 
similar  to  those  of  Trinidad.     (See  p.  101.) 

Canada  and  Newfoundland. — In  1919  the  United  States  Geolog- 
ical Survey  roughly  estimated  the  petroleum  resources  of  Canada  at 
nearly  1,000,000,000  barrels.  The  Canadian  production  of  crude 
petroleum  in  1921  was  only  190,000  barrels,  wnich  supplied  only  a 

li  S.  Doc.  272,  66th  CoQg.,  2d  sess.,  p.  12. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


51 


small  proportion   of   the   Dominion's   requirements.     In    1921    the 
British  Foreign  Office  stated  (see  p.  101)  that — 

Exploitation  in  Canada  is  confined  to  British  registered  companies,  but  it  is  worth 
noting  that  the  most  active  company  in  Canada,  in  regard  to  both  imports  and  pros- 
pecting work,  is  Imperial  Oil  (Ltd.\  a  subsidiary  of  the  Standard  Oil  Co.  of  New  Jersey. 

During  the  past  two  years  petroleum  production  was  developed  in 
the  MacKenzie  River  Basin  m  the  Canadian  Northwest  territories. 
The  Imperial  Oil  Co.  was  active  in  this  development.  Since  this  oil 
field  was  discovered  the  following  regulation  was  incorporated  in  the 
mining  laws  of  the  Dominion  of  Canada:^* 

Citizens  of  another  country,  the  laws,  customs,  or  regulations  of  which  deny  similar 
or  like  privileges  to  citizens  or  corporations  of  the  British  Empire,  shall  not,  by  stock 
ownership,  stockholding,  or  stock  control,  own  any  interest  in  any  permit  or  lease 
acquired  under  the  provisions  of  these  regulations. 

Apparently  this  provision  was  adopted  because  the  United  States 
had  included  a  like  provision  in  the  general  leasing  act  of  February 
25   1920. 

in  1921  the  British  Foreign  Office  (see  Exhibit  13,  p.  101)  stated  in 
referring  to  Newfoundland  and  certain  other  British  colonies  that — 

In  none  of  these  dominions  is  there  at  present  any  general  prohibition  of  the  exploi- 
tation of  oil  lands  by  foreigners. 

♦  *♦**** 

In  Newfoundland  the  grant  to  a  British  company  of  a  prospecting  license  for  five 
years  over  all  unallocated  Crown  lands  is  being  considered. 

The  British  company  referred  to  was  the  Anglo-Persian  Oil  Co. 

Trinidad. — The  production  of  crude  petroleum  in  Trinidad  was 
estimated  as  2,354,000  barrels  for  1921.  According  to  the  official 
statement  of  the  British  Foreign  Office  (see  p.  101)  of  April  21,  1921 — 

In  the  rase  of  private  lands  there  is  no  nationality  restriction,  but  the  lessees  of 
Crown  or  alienated  ^^  lands  must  be  British  subjects  or  a  British-controlled  company. 
Exception  has,  however,  been  made  in  the  case  of  an  American  company  which,  in 
view  of  good  pioneer  work  done  on  private  lands,  has  Ixjen  permitted  to  lease  certain 
Crown  lands. 

All  leases  to  Government  lands  arc  said  to  provide  against  the 
control  or  management  of  the  leased  property  ever  getting  into  the 
hands  of  foreigners.  Exhibit  16  (p.  107)  shows  a  typical  agreement 
with  the  United  British  West  Indies  Petroleum  Syndicate  (Ltd.) 
with  forms  of  (I)  exploration  license,  (II)  license  to  prospect  for  oil 
on  Crown  lands,  (III)  oil  mining  lease,  and  (IV)  pipe-line  agreements, 
annexed. 

The  restrictions  in  Trinidad  respecting  titles  to  petroleuni-producing 
properties  are  typical  of  most  of  the  British  Crown  colonies. 

Barbados.— The  British  Foreign  Office  in  1921  stated  that — 

There  is  no  production,  but  praspectin^  work  is  teing  done  by  a  British  company 
in  Barbados. 

Also,  that — 

There  are  no  nationality  restrictions.     ('See  p.  102. ) 

Senate  Document  No.  272  (66th  Cong.,  2d  sess.,  p.  8)  states  that — 

The  oil  mines  act.  1904-1 90S,  III,  60,  empowers  the  governor  in  ex^^cutive  committee 
to  make  regulations  and  by  provisional  order  grant  to  any  person  the  right  to  survey 

>«  S.  Doc.  11,  67th  Cong,,  1st  sess.,  p.  7. 

w  I.  e.,  lands  the  surface  of  which  lias  been  alienated  by  the  Crown  for  agricultural  purposes  since  Jan. 
17, 1902. 


f*lpppppp***^**f 


■.*en^.igti'^Ttv.v  f.'Ji-axc-iiuwm  ■ 


52 


foreig:?^  ownership  in  the  petroleum  industry. 


r.,.  '^ 


and  to  prolie  and  bore  to  ascertain  tho  nature  of  the  soil  and  to  make  explorations 
and  mine  for  oil  within  an  area  that  the  governor  and  the  executive  committee  may 
think  proper. 

The  errant  to  the  British  Union  Oil  Co.,  known  as  the  British  Union  Oil  Co.  act  of 
1919,  expressly  provided  that  the  privileo:es  and  powers  therein  shall  not  be  conveyed 
or  extended  to  any  successors  of  tne  said  British  Union  Oil  Co.  of  a  nationality  other 
than  British. 

Section  5.  Bestrictions  in  France  and  French  colonies. 

The  reserves  of  petroleum  in  France  and  its  possessions  have 
been  roughly  estimated  by  the  United  States  Geological  Survey  at 
from  one  to  one  and  one-half  billion  barrels.     The  production  of 

Eetroleum  in  France  (Alsace)  in  1921  was  estimated  as  392,000 
arrels.  Although  there  are  encouraging  indications  of  the  presence 
of  petroleum  in  continental  France,  no  mineral  oil  concessions  appear 
to  nave  been  granted,  but  several  projects  are  in  course  of  develop- 
ment in  the  North  African  colonies. 

General  policy. — The  French  Government  exercises  wide  dis- 
cretionary  powers  in  granting  concessions,  the  public  interest  appar- 
ently bemg  the  controlling  factor.  According  to  a  report  otthe^ 
United  States  Department  of  State,  there  is  reason  to  believe  that 
the  French  policy  respecting  the  granting  of  petroleum  concessions  ^^ — 

Would  find  expression  in  a  restriction  on  development  by  aliens  at  least  to  the 
extent  that  concessions  would  not  be  granted  to  alien  groups  unless  they  form  a  part 
of  a  French  joint  stock  company,  of  which  two-thirds  of  the  directors  should  be  French 
citizens. 

This  polic>  would  probably  be  eftective  in  Algeria.  French  West  Africa,  and  Mada- 
gascar, should  petroleum  be  found  in  those  dependencies.  It  does  not  appear  whether 
the  above  restrictions  would  be  applicable  to  Morocco  and  Tunis. 

The  commission  was  informed  by  the  Sinclair  Consolidated  Oil 
Corporation,  under  date  of  August  1,  1922  (see  E^xhibit  17,  p.  125) 
that — • 

Under  the  administrative  practice  in  France  it  is  impossible  for  a  foreigner  to 
obtain  an  oil  concession,  and  the  Government  has  adopted  the  policy  of  granting 
such  concessions  only  on  the  basis  that  67  per  cent  of  the  shares  of  the  company  be- 
French  capital  and  remain  in  French  hands.  In  practice  it  has  been  found  that 
France  and  the  French  colonies  are  more  completely  closed  to  development  by 
American  companies  than  in  any  other  part  of  the  world. 

War-time  control  in  France  over  the  petroleum  industry  is  said 
still  to  exist  in  a  modified  form  under  the  Directeur  des  Essences  et 
Petroles,  who  also  exercises  a  control  over  selling  prices.  (See 
Exhibit  11,  p.  94.) 

An  act  providing  for  complete  nationalization  of  mineral  resources 
was  enacted  September  9,  1919,  but  it  is  not  clear  whether  this 
applies  to  petroleum  resources. 

San  Remo  agreement. — An  agreement  signed  at  San  Remo  on 
April  24,  1920,  by  representatives  of  the  French- and  British  Govern- 
ments, and  subsequently  confirmed  by  the  two  Governments  (see 
Exhibit  14,  p.  104),  contains  the  following  provisions: 

14.  Northern  Africa  mid  other  Colonies.— The  French  Government  will  accord 
facilities  to  any  British  group  or  groups  of  good  standing  which  can  offer  the  necessary 
guarantee,  which  wall  operate  in  conformity  with  French  legislation,  for  the  acquisi- 
tion of  petroleum  concessions  in  the  colonies  of  France,  or  in  French  protectorates  or 
zones  of  influence,  including  Algeria.  Tunis,  and  Morocco.     It  is  well  to  point  out 

>'  S.  Doc.  272,  66th  Cong.,  2d  sess.,  p.  4. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


53 


that  the  French  Parliament  has  decided  that  groups  formed  under  these  conditions 
are  obliged  to  contain  at  least  67  per  cent  French  interests.  .... 

15.  The  French  Government  will  facilitate  the  granting  of  all  concessions  in  Algeria 
which  are  now  liable  to  examination  as  soon  as  the  applicants  have  complied  with 
all  the  requirements  of  French  legislation.  . 

16.  Colonies  of  the  British  Crown.— Aa  far  as  the  existing  regulations  will  permit,  the 
British  Government  will  accord  to  the  French  dependents  who  may  desire  to  explore 
and  exploit  petroleum  regions  in  the  Crown  colonies,  advantages  corresponding  to 
those  France  has  accorded  to  British  subjects  in  the  French  colonies. 

Section  6.  Restrictions  in  the  Netherlands. 

The  principal  petroleum  resources  under  the  control  of  the  Nether- 
lands are  in  the  Dutch  East  Indies.  These  reserves  were  roughly 
e^stimated  by  the  United  States  Geological  Survey  at  from  three  to 
three  and  one-half  biUion  barrels.  In  1921,  18,000,000  barrels  were 
produced,  as  compared  with  2,200,000  barrels  in  1900.  Valuable  oil 
fields  are  located  in  the  islands  of  Sumatra,  Java,  and  Borneo.  The 
island  of  Ceram  shows  promising  indications.  The  Djambi  field 
is  located  in  south  central  Sumatra  and,  although  yet  undeveloped,  it 
shows  indications  of  great  productivity. 

The  Royal  Dutch-Shell  mterests  control  directly  or  indirectly  all 
petroleum  operations  of  any  consequence  in  the  Dutch  East  Indies. 
The  Nederlandsche  Koloniale  Petroleum  Maatschappij,  a  subsidiary 
of  the  Standard  Oil  Co.  (New  Jersey),  has  small  holdings,  and  it  is  the 
onlv  American  companv  operating  in  the  Dutch  East  Indies.     (See 

Exhibit  18,  p.  125.) 

Legal  restrictions. — According  to  the  law  of  the  Dutch  East 
Indies,  rights  to  petroleum  mining  are  held  only  by  the  Government 
or  by  companies  working  under  contract  with  the  Government.  The 
mining  law,  as  amended  in  1918,  contains  provisions  as  follows: 

Article  1.  (1)  In  the  Netherlands  East  Indies  rights  in  land  do  not  include  the 
right  of  disposal  over  the  following  minerals,  etc. : 

(h)  Anthracite  and  all  kinds  of  hard  and  soft  coal,  petroleum,  bitumen,  mineral 
wax,  and  all  other  kinds  of  bituminous  substances,  either  solid  or  liquid,  and  inflamma- 
ble gases— the  latter,  in  so  far  as  they  are  not  of  recent  date  (marsh  gases);  iodine 

and  its  combinations. 

******* 

(3)  The  right  of  prospecting  for  and  extracting  such  minerals,  etc.,  will  be  granted 
pursuant  to  the  provisions  of  this  law. 


* 


Art.  4.  (1)  Only  the  following  can  hold  prospecting  licenses  or  mining  conces- 
sions: 

(a)  Netherlands  nationals:  (6)  inhabitants  of  the  Netherlands  or  of  the  Netherlands 
East  Indies:  (c)  companies  domiciled  in  the  Netherlands  or  in  the  Netherlands 
East  Indies,  of  which,  in  the  case  of  limited  companies,  the  single  manager  or  director, 
or  both,  or  if  there  are  several  managers  or  directors,  the  majority  of  such  managers 
or  directors,  and  in  the  case  of  private  companies  financed  by  a  sleeping  partner, 
the  single  active  partner,  or  if  there  are  two  such,  both,  or  if  there  are  several  such, 
the  majority  of  them,  are  Netherlands  nationals  or  inhabitants  of  the  Netherlands 
East  Indies  (in  the  latter  case  residing  in  the  Netherlands  East  Indies  or  in  the  Nether- 
lands), with  the  proviso:  That  the  persons  or  companies  not  domiciled  in  the  Nether- 
lands East  Indies  must  be  properly  represented  there:  and  that  persons  domiciled  in 
the  Netherlands  East  Indies,  the  representatives  in  the  Netherlands  East  Indies  of 
persons  not  domiciled  there,  and  tne  resident  managers  or  representatives  in  the 
Netherlands  East  Indies  of  companies  domiciled  there  or  in  the  Netherlands,  must 
have  authority  to  stay  in  the  district  or  districts  in  which  the  prospecting  or  mining  is 
to  take  place. 


::irwiX3tim  ■■'*». 


■*B%I»r..*  --r^'^-'omvl 


m 


54 


FOREIGN   OWNERSHIP  IN   THE   PETROLEUM   INDUSTRY. 


Art.  5  A.  (1)  The  Government  shall  have  power  to  cause  prospecting  and  mining 
to  be  carried  on  in  places  where  such  do  not  conflict  with  rights  granted  to  prospectors 
or  concessionaires. 

(2)  For  this  purpose  the  Government  shall  have  power  either  to  undertake  pros- 
pecting and  mining  work  itself  or  to  enter  into  agreements  with  persons  and  com- 
panies binding  them  to  undertake  the  work  of  prospecting  and/or  mining:  Provided, 
That  such  persons  satisfy  the  requirements  laid  down  under  clause  1  of  article  4  of  this 
law. 

(3)  With  the  exception  of  agreements  referring  exclusively  to  the  undertaking  of 
prospecting  work,  such  agreements  shall  not  be  concluded  until  authority  to  do  so  has 
been  granted  by  law  in  each  individual  case. 

*♦»**♦» 

Art.  28.  (2a)  The  discovery  of  one  of  the  minerals,  etc.,  8pecifi'}d  sub  (b)  in  clause 
1  of  article  1,  shall  not  entitle  the  discoverer  to  a  mining  concession.  Only  the  Gov- 
ernment, or  persons  or  companies  with  whom  contracts  are  entered  into  by  the  Gov- 
ernment in  pursuance  of  the  stipulations  of  article  5a,  shall  have  the  right  to  mine  such 
minerals,  etc.  In  the  absenre  of  a  special  agreement  the  reward  for  such  a  discovery 
shall  be  determined  in  each  case  by  the  governor  general. 

*  «  *  *  *  ♦  ♦ 

The  above  provisions  show  that  the  discovery  of  petroleum  does 
not  entitle  the  discoverer  to  a  mining  concession;  that  to  mine  petro- 
leum is  the  right  only  of  the  Government  or  persons  or  companies 
with  whom  contracts  are  entered  into  by  the  Government,  namely, 
Dutch  subjects,  inhabitants  of  the  Netherlands  or  the  Dutch  East 
Indies,  and  companies  incorporated  under  Dutch  laws,  either  in  the 
Netherlands  or  the  Dutch  East  Indies,  having  on  their  board  of 
directors  a  majority  of  Dutch  subjects. 

The  provisions  of  the  above-quoted  law  and  the  method  of  adminis- 
tration gave  the  Royal  Dutch-Shell  combination  practically  a  monop- 
oly of  tne  production  of  the  Dutch  East  Indies.     (See  also  p.  16.) 

The  Djambi  concession. — On  November  22,  1920,  a  bill,  spon- 
sored by  the  Government,  was  introduced  in  the  Netherlands  Par- 
liament to  authorize  the  minister  for  the  colonies  to  establish  for  and 
on  behalf  of  the  Dutch  East  Indies,  a  registered  corporation  with  the 

Serson  or  persons  tu  be  nominated  by  him,  that  shall  be  called  the 
[ederlandsch-Indische  Aardolie  Maatschappij  (Netherlands  Indies 
Mineral  Oil  Co.)  for  the  development  of  the  Diambi  oil  fields.  From 
an  explanatory  memorandum  accomparryung  the  bill  it  appeared  that 
the  person  to  be  nominated  was  tne  Bataafsche  Petroleum  Co.,  a 
subsidiary  of  the  Royal  Dutch-Shell  group. ^*  As  to  the  value  of  this 
concession,  a  communication  addressed  by  the  American  Legation 
at  The  Hague  to  the  Dutch  minister  of  foreign  affairs,  stated  in  part 
that— ^« 

American  scientists  and  oil  experts  who  have  a  very  intimate  knowledge  of  the  oil 
resources  of  the  Indies  agree  that  the  Djambi  fields  do  represent  substantially  the  oil 
wealth  of  the  country. 

In  theso  conditions  I  think  it  is  not  unnatural  therefore  for  us  to  feel  that  the 
contemplated  agreement  with  the  Bataafsche  does  in  fact,  although  perhaps  not  in 
theory,  constitute  a  monopoly — a  setting  aside  for  the  exclusive  development  by  one 
company  in  which  foreign  capital  other  than  American  is  largely  interested  of  the 
richest  mining  district  known  in  the  Netherlands  East  Indies.  I  nder  these  circum- 
stances I  should  not  be  surprised  if  my  Government  did  not  attach  any  very  great 
significance  to  the  assurances  that  have  been  given  me  from  time  to  time  that  nothing 
in  the  proposed  legislation  contemplated  the  prohibition  of  American  capital  from 
participation  in  the  development  of  the  oil  regions  other  than  the  Djambi  fields. 

When  it  became  known  that  a  bill  was  being  considered  for  the 
granting  of  petroleum  rights  in   the  Djambi,   the  desirability  for 

w  S.  Doc.  11,  67th  Cong.,  1st  sess.,  p.  9. 
»»  S.  Doc.  39, 67th  Cong.,  1st  sess.,  p.  4. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


55 


American  participation  did  not  escape  the  attention  of  the  American 

Government,  and  considerable  correspondence  on  the  subject  was 

exchanged  between  representatives  of  the    two  Governments,  both 

before  and  after  the  introduction  of  the  bill  in  the  Parliament  of  the 

Netherlands  and  before  its  passage.^^     In  reference  to  this  matter. 

Senate  Document  No.  11  states:  ^^ 

In  view  of  the  fact  that  American  citizens  had  not  found  it  possible  to  acquire 
petrolpum  properties  in  the  Netherlands  East  Indies,  except  some  few  of  relatively 
negli'nble  importance,  and  in  view  of  the  further  fact  that  Netherlands  citizens  had 
acquired  and  developed  and  were  continuing  t»  acquire  and  develop  extensive 
holdinc^  in  the  United  States  on  terms  of  equality  with  American  citizens,  it  waa 
hoped Ihat  the  Djambi  concessions  bill  might  be  so  modified  as  to  admit  American 
citizens  and  American  capital  to  participation  in  the  projected  development.  While 
the  bill  was  still  under  consideration  by  the  council  of  state,  and  prior  to  its  introduc- 
tion into  the  Parliament,  an  expression  of  this  hope  was  conveyed  by  the  jVmencan 
minister  at  The  Hague  to  the  appropriate  officials  of  the  Netherlands  Government. 

The  following  excerpt  from  a  note  sent  by  the  United  States 
Department  of  State  to  the  Netherlands  Legation  at  Washington, 
imder  date  of  November  2,  1920,  illustrates  the  importance  attached 
to  the  granting  of  these  concessions :  ^^ 

I  may  add  that  the  Government  of  the  United  States  welcomes  the  intimation 
contained  in  your  note  that  the  Netherlands  Government  does  not  intend  to  give  to. 
the  Royal  Dutch  Petroleum  Co.  a  virtual  monopoly  of  the  exploitation  of  the  remaining 
petroleum  fields  in  the  Netherlands  East  Indies.  As  you  are  aware,  the  bill  referred 
to  in  vour  note,  which  is  now  under  consideration  by  the  Netherlands  Government, 
and  which  provides  for  an  agreement  with  the  Bataafsche  Petroleum  Maatschappij,  a 
Bubsidiary  of  the  Royal  Dutch  Petroleum  Co.,  according  to  which  the  subsidiary 
companyls  to  receive  exclusive  exploitation  rights  in  the  Djambi  concessions  in  Suma- 
tra, has  formed  the  subject  of  representations  to  your  Government  by  the  American 
minister  at  The  Hague.  While  it  is  recognized  that  this  agreement  provides  for  the 
disposition  of  onlv  one  field,  it  is  understood  that  this  field  includes  the  most  valuable 
of  the  remaining'  prospective  petroleum  territories  in  the  Netherlands  East  Indies, 
and  that  American  companies  thus  far  have  been  unsuccessful  in  requests  for  a  share 
in  the  concession.  Frankness  requires  me  to  state  that  the  disposition  of  this  field  at 
the  present  time  in  the  manner  stipulated  by  the  proposed  agreement  impresses  this 
Government  as  an  indication  of  a  policy  to  exclude  companies  controlled  by  American 
citizens  from  the  petroleum  industry  of  the  Netherlands  East  Indies. 

Policy  of  the  United  States. — There  is  no  doubt  in  the  minds 
of  citizens  of  the  United  States  that  the  Royal  Dutch-Shell  combina- 
tion has  practicallv  a  monopoly  of  the  production  of  the  Netherlands 
East  Indies,  and  that  American  interests  have  been  excluded  from  oil 
developments  in  that  territory.  The  situation  is  appreciated  by  the 
Department  of  the  Interior,  which  has  recently  refused  to  grant  the 
Shell  Co.  of  California  a  permit  to  prospect  certain  supposed  oil- 
bearing  lands  in  Utah  unless  the  company  is  able  to  satisfy  that 
department  that  the  Government  to  which  the  Shell  Co.  owes  allegi- 
ance does  not  discriminate  against  Americans.  This  position  is  in 
harmony  with  the  general  leasing  law  of  February  25,  1920,  pertain- 
ing to  pubhc  lands,  and  particularly  to  that  portion  of  section  1  of 
the  law  which  provides — 

That  citizens  of  another  country,  the  laws,  customs,  or  regulations  of  which  deny 
similar  or  like  privileges  to  citizens  or  corporations  of  this  country,  shall  not,  by 
stock  ownership,  stockholding,  or  stock  control,  own  any  interest  in  any  lease  acquired 
under  the  provisions  of  this  act. 

»  See  S.  Docs.  11  and  39,  67th  Cong.,  1st  sess. 
«»  S.  Doc.  11,  67th  Cong.,  1st  sess.,  p.  9. 
«  S.  Doc.  11,  67th  Cong.,  1st  sess.,  p.  21. 


I. 


pi 


I 


■>.»    "  t  t&y 


.*i':.<M»ia»-»r>. 


k^* 


66 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


According  to  reports  to  the  State  Department,  although  Royal 
Dutch-Shell  interests  control  almost  the  entire  area  of  proven  lands 
in  the  Netherlands  East  Indies,  there  are  still  large  areas  of  unproven 
lands.  Of  these  unproved  lands  a  considerable  portion  is  still  closed 
to  private  development  by  Government  reservation.  The  Govern- 
ment of  the  Netherlands  states  that  companies  other  than  the  Royal 
Dutch-Shell  group  would  be  considered  when  other  regions  are  opened 
to  development.^^ 

Section  7.  Restrictions  in  Russia. 

The  petroleum  reserves  of  southeast  Russia,  southwest  Siberia,  and 
the  res^on  of  the  Caucasus  have  been  estimated  by  the  United  States 
Geological  Survey  at  5,830,000,000  barrels,  while  those  of  northern 
Russia  and  Sakhalin  are  estimated  by  the  same  authority  at  925,- 
000,000  barrels.  Russia  was  credited  with  a  production  of  28,500,000 
barrels  in  1921,  its  proportion  of  world  production  having  declined 
from  about  38  per  cent  before  the  war  to  less  than  10  per  cent  in  1921. 

Among  the  present  policies  of  the  Russian  administration  at  Mos- 
cow is  that  of  nationalization  of  the  country's  petroleum  resources, 
and  in  pursuance  of  this  policy  control  of  oil  fields  was  taken  by  the 
'Russian  administration  without  regard  to  ownership  and  without 
compensation.  By  a  decree  dated  June  20,  1918,  all  movable  or 
immovable  property  belonging  to  the  petroleum  mdustry  was  de- 
clared the  property  of  the  State,  and  trading  in  oil  was  made  a  State 
monopoly,  production  and  distribution  being  placed  under  the  general 
management  of  the  chief  petroleum  committee  of  the  fuel  department 
of  the  supreme  council  of  national  economy.  It  is  reported  that  the 
]  International  Barnsdall  Oil  Corporation,  an  American  company,  has 
^j  obtained  a  concession  from  the  Russian  administration  at  Moscow 
to  develop  production  in  the  Baku  district. 

Section  8.  Restrictions  in  other  European  countries. 

Of  the  European  countries  not  already  discussed,  only  Poland  and 
Rumania  have  a  large  production  of  crude  petroleum.  The  oil  lands 
of  Poland  are  located  in  Galicia.  In  1921  Rumania  had  a  production 
of  about  8,350,000  barrels  of  crude  petroleum  and  Poland  about 
4,000,000  barrels.  The  Governments  of  several  other  European 
countries  have  been  active  in  attempts  to  develop  petroleum  pro- 

PoLAND.— As  already  stated,  the  Polish  oil  lands  are  concentrated 
in  Galicia  and  extend  over  a  wide  strip  of  territory  along  the  Carpa- 
thian range.  The  Polish  Government  owns  large  tracts  of  unde- 
veloped oil  lands  and  operates  a  refinery  with  a  daily  capacity  of 
6,000  barrels  at  Drohobycz.     It  is  reported  that— ^4 

Concessions  for  the  development  of  oil  fields  can  be  secured  from  the  Polish  G9vern- 
ment  by  foreign  capitalists  under  very  advantageous  conditions,  o\\ing  to  the  inade- 
quacy of  domestic  capital. 

The  regulations  governing  explora-tion  and  development  were  de- 
sicrned  to  promote  drilling  activity.  S.  Eustachy,  writing  m  L'Est 
Europeen,  stated  that  the  Polish  Government  had  resolved  to  grant 
petroleum  concessions  along  the  following  general  lines  .^^ 

1  The  Government  will  grant  licenses  to  Polish  citizens  or  foreigners  for  preparatory 
geological  research  work  in  tracts  of  from  500  to  1,000  hectares  of  State  property 


«»  S.  Doc.  39,  67th  Cong.,  1st  sess.,  p.  7. 


M  Oil  and  Gas  Joarnal,  Oct  19,  1922,  p.  90. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


57 


(1  hectare=2.471  acres).  After  one  year  of  preparatory  work,  the  prospecting  group 
must  select  for  exploitation  one  of  several  plots  of  50  hectares  aggregating  not  more 
than  500  hectares. 

2.  The  concessionaire  will  agree  to  sink  during  the  following  year  at  least  one  well 
per  50  hectares  of  land  leased,  the  depth  to  be  reached  at  the  end  of  that  period  being 
specified  in  the  contract  unless  the  concessionaire  agrees  to  produce  a  certain  quantity 
of  oil  during  the  year.  Following  the  first  well's  completion,  the  company  must 
start  work  on  a  new  well  within  12  months. 

3.  Fifty  hectare  tracts  adjoining  the  company's  fields,  or  simply  situated  within 
the  area  for  which  the  company  had  secured  its  temporary  license,  but  which,  at  the 
end  of  the  first  year,  were  not  selected  for  development  work,  may  be  placed  under 
exploitation  by  the  Government. 

4.  The  ground  to  be  finally  purchased  from  the  Government  will  be  that  upon  which 
rigs,  plants,  roads,  etc.,  have  been  built. 

5.  The  State  will  participate  in  the  profits  to  the  extent  of  from  6  to  12  per  cent. 
(Private  owners  of  oil  lands  collect  from  12  to  24  per  cent  of  the  net  profits.) 

6.  Concessions  will  be  granted  for  30  years,  extension  to  50  years  being  accorded  if 
the  concessionaire  so  requests. 

Rumania. — In  1921  Rumania  was  credited  with  a  production  of 
about  8,350,000  barrels  of  petroleum.  Agitation  for  nationalization 
of  the  petroleum  industry  oi  Rumania  has  not  yet  resulted  in  definite 
legislation  to  that  effect,  but  by  a  decree  of  November  27,  1918, 
large  land  areas  were  expropriated  from  both  native  and  foreign 
owners  and  resold  to  peasants,  the  Government  reserving  the  subsoil 
rights.  Portions  of  Government  lands,  which  were  leased  from  time 
to  time,  are  now  operated  by  both  foreign  and  native  capitalists,  but 
since  1909,  with  the  exception  of  two  small  leases  obtained  by  local 
concerns,  the  Government  has  withheld  the  granting  of  leases. 

A  summary  of  a  legal  opinion  rendered  oy  S.  Rosenthal  to  the 
British  ambassador  at  Paris,  on  February  21,  1919,  stated  in  effect 
that — 

The  provisions  of  the  Rumanian  constitution  relative  to  agrarian  reform  and  ex- 
propriation of  lands  and  the  decrees  ruling  the  application  of  the  same  have  been  inter- 
preted as  not  affecting  in  any  way  existing  oil  concessions  or  rights  ceded  to  English 
or  other  foreign  companies.  However,  lands  declared  oil  bearing  and  not  yet  worked  or 
conceded  which  are  part  of  a  property  belonging  to  a  Rumanian  domiciled  abroad  or 
to  a  foreigner  are  included  in  expropriation,  although  this  will  presumably  only  take 
place  on  pa^inent  of  a  just  indemnity. 

Italy. — The  quantity  of  petroleum  produced  in  Italy  is  only  about 
5  per  cent  of  the  country's  requirements.  Most  of  the  imports  are 
from  the  United  States.  Italians  are  believed  to  possess  no  important 
petroleum  rights  in  foreign  fields.  The  commission  is  informed  that 
although  foreigners  are  not  specifically  excluded  from  the  acquisition 
and  development  of  petroleum  lands  by  the  ItaUan  mining  law,  vet 
in  practice  the  Government  has  refused  to  grant  such  rights  to  other 
than  Italians  or  companies  the  directorates  of  which  are  entirely 
Italian  and  the  capital  stocks  of  which  are  at  least  two-thirds  owned 
by  their  own  nationals.  It  appears  that  such  provisions,  made  by 
tne  mining  law  in  respect  to  sulphur,  alkali,  and  mineral  phosphates, 
have  been  applied  oy  the  Government  to  petroleum.  (See  Ex- 
hibit 18,  p.  126.) 

Greece. — The  Anglo-Persian  Oil  Co.  recently  received  from  the 
Greek  Government  an  exclusive  concession  for  all  petroleum  rights 
in  eastern  and  western  Macedonia  for  an  exploration  period  of  five 
years,  with  an  option  for  a  50-year  exploitation  concession  in  certain 
districts.  (See  agreement  with  the  D'Arcy  Exploration  Co.  (Ltd.), 
Exhibit  11,  p.  96.) 


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58 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


Section  9.  Restrictions  in  Mexico. 

Next  to  the  United  States,  Mexico  is  now  the  largest  producer  of 
crude  petroleum  in  the  world.  Of  the  estimated  world  production  of 
759,030,000  barrels  of  petroleum  in  1921,  Mexico  s  production  was 
195,000,000  barrels,  and  that  of  the  United  States  470  000,000  bar- 
rels The  Mexican  reserves  were  estimated  by  the  United  btates 
Geological  Survey  in  1919  at  4,500,000,000  barrels. 

Prior  to  the  enactment  of  the  Mexican  constitution  of  1917,  con- 
cessions for  the  exploitation  of  mineral  deposits  in  Mexico  were  freely 
frranted  to  foreign  individuals  and  companies,  and  there  were  no 
Restrictions  on  natives  selling  oil  lands  to  foreigners.  The  consti- 
tution of  1857  gave  the  Mexican  Congress  power  to  enact  mming  and 
commercial  codes,  which  were  to  be  binding  throughout  the  Kepublic, 
and  it  also  provided  against  the  enactment  of  any  retroactive  law, 
and  that  ^^— 

Private  property  shall  not  be  taken  without  the  consent  of  the  owner,  except  for 
reasons  of  public  welfare,  compensation  having  been  made. 

The  Mexican  Congress,  in  the  exercise  of  its  power,  enacted  a  law 
in  1884  providing  that  ^^ — 

Foreigners  may  acquire  mining  property  on  such  terms  and  with  such  lifjtationB 
as  the  laws  of  the  Republic  grant  them  the  capacity  to  acquire,  own,  and  transfer 
ordinary  property. 

It  included  ''  petroleum  and  gaseous  springs''  among  the  substances 
named  as  the  ''exclusive  property  of  the  owner  of  the  land. 

On  June  4,   1892,  another  law  was  enacted,  which  provided   as 

follows:  ^^ 

Art.  4.  The  owner  of  the  land  may  freely  work  without  a  special  license  (conces- 
sion) in  any  case  whatsoever,  the  following  mineral  substances:  Mineral  fuels,  oils, 

*''AR'?.''5%irmfning  property  legally  acauired  and  such  as  hereafter  may  be  acquired 
in  pursuance  of  this  law  shall  be  irrevocable  and  perpetual,  so  long  as  the  Federal  prop- 
erty tax  is  paid  in  pursuance  of  the  provisions  of  the  law  creating  the  said  tax. 

Article  2  of  the  law  of  November  25,  1909,  provided  that^«— 

The  following  are  the  exclusive  property  of  the  owner  of  the  soil: 

1.  Ore  bodies  or  deposits  of  mineral  combustibles,  of  whatsoever  form  or  variety. 

2.  Ore  bodies  or  deposits  of  bituminous  substances. 

Mexico  having  been  proven  rich  in  petroleum  deposits,  the  oppor- 
tunities thus  afforded  foreign  interests  for  development  and  exploita^ 
tion  of  the  country's  oil  lands  were  quickly  taken  advantage  of,  and 
strikingly  large  sums  were  spent  for  this  purpose,  both  by  American 
and  other  foreign  interests.  In  1919  American  companies  produced 
\  over  70  per  cent  of  the  Mexican  crude  petroleum  production.  Ihe 
■provision  of  the  Mexican  mining  law  in  respect  to  denouncement 
(filing  claim  by  due  legal  process)  was  modified  by  articles  27  and  66 
of  the  constitution  of  1917  as  follows:  " 

Art  27.  The  ownership  of  lands  and  waters  comprised  witlnn  the  limits  of  th^ 
national  territory  is  vestecf  originally  in  the  nation,  which  has  had  and  has  the  right  tx> 
transmit  titie  thereof  to  private  persons,  thereby  constituting  P^^Yate  property 

Private  property  shall  not  be  expropriated  except  for  reasons  of  public  welfare  and 
by  means  of  compensation. 

«»  U.  S.  Bureau  of  Mines  Bull.  206,  p.  439. 

••U.S.  Bureau  of  Mines  Bull.  206,  b,  440.     ^       ,         t   j     »         *   i  ^  nr 
"  Federal  Trade  Commission,  Pacific  Coast  Petroleum  Industry,  pt.  1,  p.  3o. 
•«  U.  S.  Bureau  of  Mines  Bull.  206,  pp.  441-442. 


FOREIGN  OWNEBSHIP  IN  THE  PETROLEUM  INDUSTRY. 


59 


1 ' 


The  nation  shall  have  at  all  times  the  right  to  impose  on  private  property  such 
limitations  as  the  public  interest  mav  demand  as  well  as  the  right  to  regulate  the 
enjoyment  of  natural  resources,  which  are  susceptible  of  appropriation,  m  order  to 
conserve  them  and  equitably  to  distribute  the  public  wealth.     *    *    *•        ,  u 

In  the  nation  is  vested  the  legal  ownership  (dominie  directe)  of  all  minerals  or  sub- 
stances   *    *    *    petroleum  and  all  hydrocarbons— solid,  liquid,  or  gaseous. 
******* 

Legal  capacity  to  acquire  ownership  of  lands  and  waters  of  the  nation  shall  be 
iffoverned  by  the  following  provisions:  ,  .  .       •  .. 

I  Only  Mexicans  by  birth  or  naturalization  and  Mexican  companies  have  the  right 
to  acciuire  ownership  in  lands,  waters,  and  their  appurtenances,  or  to  obtain  Conces- 
fiions  te  develop  mines,  waters,  or  mineral  fuels  in  the  Republic  of  Me3Qco  The 
nation  may  grant  the  same  right  to  foreigners,  provided  they  agree  before  the  depart- 
msBX  of  foreign  affairs  to  be  considered  Mexicans  in  respect  te  such  property,  and 
aoeajdingly  not  to  invoke  the  protection  of  their  Governments  in  respect  to  the  same, 
und«r  penalty,  in  case  of  breach,  of  forfeiture  to  the  nation  of  property  so  acmiired. 
Wi^liiii  a  zone  of  100  kilometers  from  the  frontiers  and  of  50  kilometers  from  the  se^ 
coaat,  no  foreigner  shall  under  any  conditions  acquire  direct  ownership  of  lands  and 
watera.  ^  *  » 

IV.  Commercial  stock  companies  shall  not  acquire,  hold,  or  administer  rural  prop- 
erties. Companies  of  this  nature  which  may  be  organized  to  develop  any  manufac- 
turing, mining,  petroleum,  or  other  industry,  excepting  only  agricultural  industnee, 
jnay  acciuire,  hold,  or  administer  lands  only  in  an  area  absolutely  necessary  for  their 
establishments  or  adequate  to  serve  the  purposes  indicated,  which  the  executive  of 

ithe  union  or  (A  the  respective  State  in  each  case  shall  determine. 

***  *  *  *  * 

AitT.  33.  Alienfl  are  those  who  do  not  possess  the  qualifications**  prescribed  by  article 
3^.  They  shall  be  entitled  to  the  guaranties  granted  by  Chapter  I,  Title  I,  of  the  pres- 
eni  constitution:  but  the  executive  shall  have  the  exclusive  right  to  expel  from  the 
Republic  forthwith,  and  v.ithout  judicial  process,  any  foreigner  whose  presence  he 

may  deem  inexpedient.  ,         ,.  •    ,     /^  •       r    u 

No  foreigner  shall  meddle  in  any  way  whatsoever  in  the  political  affairs  of  the 

country. 

«'**«♦«♦ 

Article  14  of  the  constitution  of  1917  states  also  that  no  law  shall 
be  given  retroactive  effect  to  the  prejudice  of  any  person. 

Various  decrees  bearing  upon  the  enforcement  of  article  27  of  the 
new  constitution  have  been  issued  by  the  executive  of  the  nation 
since  the  constitution's  adoption.^®  It  is  necessary  here  to  mention 
only  those  decrees  which  have  drawTi  the  attention  of  our  State 
Department  as  particularly  injurious  to  the  rights  of  American 
citizens. 

Excessive  taxation. — On  February  19,  1918,  the  President  of 
Mexico,  under  authority  of  a  congressional  resolution  of  May  8,  1917, 
issued  a  decree  which  appears  to  nave  been  the  first  effort  to  enforce 
article  27  of  the  constitution  of  1917.  The  issuance  of  this  decree 
led  to  diplomatic  protests  by  the  Governments  of  the  United  States, 
France,  and  Great  Britain.  The  position  of  the  United  States  was 
commimicated  to  the  Mexican  Government  on  April  2,  1918,  as 
follows ;  ^^ 

While  the  United  States  Government  is  not  disposed  to  request  for  its  citizens 
exemption  from  the  payment  of  their  ordinary  and  just  share  of  the  burdens  of  taxa- 
tion, so  long  as  the  tax  is  uniform  and  not  discriminatory  in  its  operation  and  can  fairly 
be  considered  a  tax  and  not  a  confiscation  or  unfair  imposition,  and  while  the  United 
States  Government  is  not  inclined  to  interpose  in  behalf  of  its  citizens  in  case  of  expor- 
priation  of  private  property  for  sound  reasons  of  public  welfare,  and  upon  just  com- 
I)ensation  and  by  legal  proceedings  before  tribunals,  allowing  fair  and  equal  oppor- 

»•  Birth  or  naturalization. 

»o  See  U.  S.  Bureau  of  Mines  Bull.  206. 

»i  S.  Doc.  272,  66th  Cong.,  2d  sess.,  p.  15. 


'■^^m'.r-MA'l^ 


""» .>y*«^ '  ■•  ';*^*«fe-4Uv-t.<'^P«:£^^'''^^'*«?-  'i»«f'r,:»/.^-^!i«M:4s?yW!*»*W3««wr<^^  omsem^m  -».'«««i*wh*«»**i»- 


60 


FOREIGN   OWNERSHIP   IN   THE  PETROLEUM   INDUSTRY. 


tunity  to  be  heard  and  giving  due  consideration  to  American  rights,  neverthelora, 
the  Unite;!  States  can  not  accmiesce  in  any  procedure  ostensibly  or  nominally  m  the 
form  of  taxation  or  the  exercise  of  eminent  domain,  but  really  resulting  in  confisca- 
tion of  private  rights  and  arbitrary  deprivation  of  vested  rights. 

PETROLEUf.1  RIGHTS  IN  FEDERAL  ZONES. — Apparently  there  has 
been  no  overt  act  detrimental  to  American  citizens  taken  by  the 
Mexican  authorities  in  pursuance  of  the  decree  signed  by  President 
Carranza  on  March  12,  1920,  relating  to  the  development  of  petroleum 
in  the  subsoil  of  the  Federal  zones.^^  ^he  preamble  to  this  decree, 
after  reciting  that  in  the  nation  was  vested  the  legal  ownership  of 
petroleum  found  in  lands  within  the  Republic,  and  of  the  surface  and 
subsoil  rights  in  the  Federal  zones,  stated:  That  through  extensive 
development  these  oil-bearing  districts  faced  early  exhaustion  with- 
out the  nation  receiving  the  fair  return  it  would  have  received  if  the 
nation  had  permitted  drilling  in  the  intersecting  and  ad^'oining 
Federal  zones;  that  by  article  27  of  the  constitution  the  Govern- 
ment was  authorized  to  grant  concessions  on  condition  that  regular 
work  of  development  be  done;  and  that  numerous  applications  for 
drilhng  permits  in  the  Federal  zones  were  on  filo.^ 

On  July  10,  1920,  an  official  circular  (No.  10)  was  pubhshed,  supple- 
menting the  decree  of  March  12,  1920,  and  prescribing  the  conditions 
under  which  concessions  would  be  granted.  The  following  sections 
of  the  circular  particularly  affected  American  rights: 

11,  No  concession  shall ^e  granted  to  develop  any  tract  of  land  on  which  there 
exists  a  prior  exclusive  concession  still  in  force  or  pending  decision. 

Ill  Each  anplicatioii  shall  cover  a  definite  tract  of  land  of  continuous  area.  In 
the  case  of  rivers  or  streams,  the  concession  shall  entitle  the  holder  to  develop  the 
district  lo<ated  on  one  of  the  banks  and  half  of  the  bed  of  the  river  or  stream. 

«  «  *  *  *  *    .       .  * 

V  If  the  applicant  be  a  corporation  or  alien  individual,  the  application  shall  be 
filed  and  continue  its  regular  course;  but  the  concession  shall  only  be  granted  to  a 
Mexican  by  birth  or  naturalization,  or  to  a  corporation  organized  under  the  laws  of 
Mexico  to  which  the  applicant  assigns  his  rights,  within  a  period  of  three  months 
from  the  date  fixed  for  the  purpose  by  the  department  of  industry,  commerce,  and 
labor. 

With  reference  to  the  above  the  United  States  Embassy  at  Mexico 
City  was  instructed  to  inform  the  Mexican  authorities  that  as  this 
circular  and  decree  apparently  threatened  the  confiscation  of  rights 
acquired  by  American  citizens  this  Government  could  not  ''remain 
insensible  to  the  rights  of  its  citizens."  The  Mexican  authorities 
made  a  formal  acknowledgment  of  the  State  Department's  commu- 
nication of  August  18,  1920,  and  stated  that  the  matter  had  been 
referred  to  the  appropriate  department. 

''Denouncements  by  third  parties  on  American -owned 
PROPERTY. — According  to  reports  made  by  American  oil  companies 
to  the  commission,  many  denouncements,  that  is,  claims  filed  by  due 
legal  process,  were  filed  against  lands  outside  the  Federal  zones, 
which  had  been  owned  or  leased  by  them,  and  subsequently  they 
were  denied  permits  to  drill  upon  such  lands.  The  American  com- 
panies appealed  to  the  State  Department  at  Washington  and  a  number 
of  vigorous  protests  were  made  to  the  Mexican  authorities  against  this 
practice. 

«  Federal  zones  include  seas,  rivers,  lakes,  marshes,  etc.,  and  commence  exactly  at  the  point  at  which 
the  banks  and  shores  meet. 
«  U.  S.  Bureau  of  Mines,  Bull.  206,  p.  409. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


61 


Section  10.  Dominican  Republic. 

Nationals  and  aliens  have  the  same  rights  in  respect  to  petroleum 
exploration  and  exploitation  in  the  Dominican  Kepublic,  special 
permits  being  required  in  either  case.  Under  the  provisions  of  a 
proposed  new  mining  law,  deposits  of  petroleum  or  of  natural  gas, 
wherever  found,  would  be  considered  the  property  of  the  nation.^* 

Section  11.  Restrictions  in  Central  and  South  America. 

The  present  production  of  crude  petroleum  in  Central  and  South 
America  is  comparatively  small.  There  has  been  little  actual  develop- 
ment and  concessions  are  still  being  acquired.  In  1919  the  United 
States  Geological  Survey  roughly  estimated  the  petroleum  reserves 
of  Central  and  South  America  at  about  9,000,000,000  barrels. 
Broadly  speaking,  in  all  of  this  territory,  with  the  exception  of 
European  possessions,  the  principal  of  reciprocity  and  equal  oppor- 
tunity exists. 

Costa  Rica. — No  restrictions  discriminating  between  aliens  and 
natives  are  found  in  the  mining  law  of  this  Republic.  The  Govern- 
ment retains  ownership  of  the  subsoil,  and  although  no  permission 
for  exploration  is  required,  acouisitions  are  secured  only  oy  conces- 
sion from  the  Government.  Tne  only  monopolies  of  oil  resources  in 
the  country  consist  of  grants  to  two  companies  of  exclusive  rights 
in  certain  provinces.^* 

Guatemala. — The  mining  code  of  Guatemala  makes  no  reference 
to  petroleum,''^  but  according  to  presidential  decree  No.  722,  approved 
by  the  national  legislative  assembly  on  April  29,  1916,  the  nation 
reserves  to  itself  the  absolute  ownership  of  all  petroleum  deposits  in 
the  Republic;  leases  for  acquisition  of  these  deposits  may  be  acquired 
only  by  native-born  or  naturalized  citizens,  and  such  leases  are 
transferrable  only  by  express  authority  of  the  Government  and  to 
citizens  of  the  Republic.^® 

Ecuador. — ^Apparently  there  are  no  restrictions  either  legislative 
or  administrative  discriminating  between  aliens  and  nationals  in  this 
Republic.  A  decree  of  the  Congress  of  Equador,  dated  October  18, 
1919,  provides  that—" 

Petroleum  deposits  not  yet  adjudicated  according:  to  law  belong  exclusively  to  the 
State;  and  no  individual  may  make  entry  thereon  until  such  time  as  the  new  law  on 
the  subject  shall  be  enacted. 

Colombia. — In  case  rights  are  secured  by  treaty  or  when  reciprocal 
rights  are  extended  to  citizens  of  Colombia  aliens  have  the  same 
rights  as  natives.  It  is  reported  that  American  citizens  and  other 
aliens  have  secured  extensive  petroleum  concessions  in  Colombia. 

Venezuela. — There  appear  to  be  no  restrictions  in  the  mining  law 
discriminating  between  aliens  and  native  citizens  in  Venezuela. 
According  to  the  United  States  Bureau  of  Mines,  concessions  to  the 
best-known  oil  territories  have  already  been  granted  and  are  practi- 
cally all  controlled  by  British-Dutch  interests,  chiefly  by  the  General 
Asphalt  Co.  and  by  subsidiaries  of  the  Royal  Dutch-Shell  group. 
The  crude  petroleum  produced  on  the  properties  of  the  above-men- 

M  S.  Doc.  272,  66th  Cong.,  2d  sess.,_p.  10. 

»5  United  States  Bureau  of  Mines,  Bull.  206,  p.  499. 

««  S.  Doc.  272,  66th  Cong.,  2d  sess.,  p.  11. 

»7  United  States  Bureau  of  Mines,  Bull.  206,  p.  575. 


y 


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62  FOREIGX  OWNERSHIP  IX   THE  PETROLEUM  I15DTraTB.T. 

tioned  companies  is  all  handled  by  the  Royal  Dntch-SheM  group, 
wh?ch  operates  a  refinery  at  Lorenzo.     In  1921  their  prodm«»n  was- 

about  1,700,000  barrels.  .    ,,      •  i  -* 

Peru -Apparently  the  only  restrictions  against  foreign  exploita- 
tion of  petroleum  resources  in  t>eru  is  in  terntor>' witlun  oO^killometere 
of  the  frontiers.  The  International  Petroleum  Co.  (Ltd.),  which  is 
controlled  by  the  Standard  Oil  Co.  (New  Je^ey) ,  has  large  cone^sions 
in  Peru,     the  estimated  production  for  Peru  m  1921  was-  J,568,000 

^"BoLiyiA.-Apparently  there  are  no  restrictions  against  foreigner 
in  the  deyelop^ent  of  petroleum-bearing  lands  m  Boh^,  as  the 
mining  law  of  iSecembcr  12,  1916,  proyides  that   — 
The  State  enjove  the  ownership  of  aU.dcpoeits.  layers.^strata,  or  otli«  beds  of  inor- 

m4"i  oTrsLg^e'conc^rfol  kno^J  n Jnlr^U.  a,id  only  30  claims  in  the  ca«e  of 
recently  discovered  minerals.    »    •    * 

No  production  has  been  developed  in  Bohvia. 

Argentina  —Valuable  petroleum  deposits  are  known  to  exist  m 
Artent!na  one  of  the  mosf  important  fields  being  that  of  Comodoro 
Rivadavia  in  the  southern  part  of  the  countrj-.  In  this  held  the 
Ai^entTne'Go'Vernment  is  {l-V  engaged  in  producing  a^^^^ 
Arlentina  is  credited  with  a  production  of  1'747  000  barrels  of  pe 
troleum  in  1921.  The  commission  is  informed  that  the  countr>  nas 
a^prrent  no  law  goyerning  the  exnloitation  of  petroleum,  but  that 
all  oil  fields  have  been  withdrawn  from  private  ownership. 

Section  12.  Restrictions  in  Asiatic  countries. 

Outside  of  the  Dutch  East  Indies  and  British  India,  the  most  im- 
portant production  of  crude  petroleum  in  Asia  is  now  produced  m 

Pe^ia  —Persia  is  beUeved  to  contain  tremendous  reserves  of  un- 
deveCed  petroleum  resources.  The  importance  of  this  country  may 
be  appreciated  from  the  fact  that  its  production  in  1921  was  about 
14  600  OoTbarrels.  The  Persian  oil  fields,  together  with  the  neigh- 
boring territory  of  Mesopotamia,  have  ri'^^'/.ff  stoTooloO 
mated  by  the  United  States  Geological  Survey  at  5,820,000,000 

^*Th?' Anglo-Persian  Oil  Co.  (Ltd.),  through  its  subsidiary  the 
North  Perlia  Oil  Co.  (Ltd.),  claimed  title  to  three  »^d^  half  of  the 
five  northern  Provinces,  a  territory  covering  about  o00,000  square 
miles  and  said  by  the  United  States  Bureau  of  Mines  to  contain  the 
most  orom'sng  oil-bearing  lands  in  Persia.  The  commission  is  in- 
f'ormeSTatTe  Persian  Government  claims  this  grant  to  be  invalid^ 
Durinc  1921  two  American  companies,  the  Standard  Oil  Co.  (Wew 
JeS  and  the  Sinclair  ConsoU/ated  Oil.Corporation,  attempted  to 
secTrVoU  concessions  in  Persia.  When  Sir  Jo^n  Madman  represent^- 
Itive  of  the  Anglo-Persian  Oil  Co.  (Ltd.),  visited  the  United  States 
Tnlg-n,  an  agreement  was  reached  with  the  Standard  Oil  Co.  (New 

»  Uhited  States  Bureau  of  Mines,  BuU.  206,  p.  521. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


63 


Jersey)  whereby  the  Standard  of  New  Jersey  and  the  .\jiglo-Persian 
Oil  Co.  (Ltd.)  submitted  a  proposal  to  the  Persian  Government  that 
these  two  companies  be  granted  a  joint  concession  to  the  undeveloped 
oil  fields  of  northern  Persia.  The  Sinclair  Consolidated  Oil  Corpora- 
tion also  entered  into  negotiation  for  a  concession  to  oil  lands  m  these 
same  Provinces.  The  Persian  Parhament  did  not  accept  either  ap- 
pUcation  for  a  concession,  but  in  the  latter  part  of  1922  announced 
that  it  would  draw  up  a  model  concession  to  be  submitted  to  these 
companies  for  acceptance.  Up  to  the  present  time  (February,  1923) 
no  concession  has  been  granted  to  the  oil  lands  in  the  northern 
Provinces  of  Persia.     (See  Exhibit  21,  p.  127.) 

A  concession  in  southern  Persia  was  granted  on  May  28,  1901,  lor 
a  period  of  60  years  to  W.  K.  D'Arcy,  through  whom  the  Ang  o- 
Persian  claims  title.^'  Citizens  of  the  United  States  are  generaUy 
excluded  from  southern  Persia.     (See  Exhibit  13,  p.  102.) 

China.— There  is  no  production  of  crude  petroleum  in  Chma. 
Indications  of  important  petroleum  deposits  are  reported  m  a  num- 
ber of  Provinces.  The  United  States  Geological  Survey  has  roughly 
estimated  the  petroleum  reserves  of  Chma  at  1,375,000,000  barrels. 
Apparently  there  are  no  restrictions  discriminating  between  for- 
eigners and  natives  in  respect  to  exploitation  of  its  petroleum 
reserves.  It  is  understood  that  at  one  tune  the  Standard  Oil  Co. 
of  New  York  had  a  concession  in  China  which  it  later  abandoned. 

Japan. — The  reserves  of  petroleum  in  Japan  and  Formosa  have 
been  roughly  estunated  by  the  United  States  Geological  Survey  at 
about  1,235,000,000  barrels.  In  1920  about  2,000,000  barrels  were 
produced.  To  meet  domestic  demands  a  q^uantity  eqmvalent  to 
about  one-third  of  its  annual  production  is  unported,  chiefly  from 
the  United  States,  the  Netherlands  East  Indies,  and  Persia.  Al- 
though the  Japanese  have  been  active  in  the  working  and  develop- 
ment of  fields  in  the  islands  of  Hondo,  Hokaido,  Taiwan  (Formosa), 
and  SakhaUn,  the  industry  is  said  to  be  showmg  no  progress,  due 
to  declines  in  production  and  the  failure  of  attempts  to  develop  new 

fields.  .  •        A-    1 

Apparently  the  production  of  crude  petroleum  in  Japan  is  entu-eiy 
in  the  hands  of  Japanese  subjects,  and  a  tendency  toward  monopoly 
is  mdicated,  there  being  only  11  companies  operating  m  1920  as 
against  34  in  1916.  The  two  big  companies,  the  Hoden  Oil  Co. 
and  the  Nippon  Oil  Co.,  were  consolidated  on  October  1,  1920,  with 
a  capital  of  $40,000,000.  This  combination  is  said  to  produce 
about  95  per  cent  of  the  crude-oil  production  of  Japan  and  to  con-r 
trol  the  refining  industry  of  that  country.  i  •     •       n 

In  Japan  the  State  reserves  the  right  of  original  owTiership  m  all 
minerals.  It  is  understood  that  prior  to  1900  foreigners  were  not 
allowed  to  work  mines  or  to  become  members  of  mining  companies 
in  Japan;  but  by  amendment  of  the  regulations  in  1900  a  business 
establishment  organized  by  Japanese  or  foreigners,  or  bv  both 
combined,  was  permitted  to  work  mines,  provided  the  establishment 
was  placed  under  Japanese  law.  By  article  5  of  the  Japanese  min- 
ing law,  promulgated  by  imperial  order  on  March  7,  1905:  ^"^ 

No  person  other  than  subjects  of  the  Empire  or  juridical  persons  duly  formed  in 
accordance  with  the  laws  thereof  are  entitled  to  acquire  mining  rights. 


»  S.  Doc,  272,  66th  Cong,,  2d  sess.,  p.  12. 
«  S.  Doc.  272,  66th  Cong,,  2d  sess.,  p.  10. 


\m 


'y'- ■>r:-ni,-'\  *■  ^ejf^,'*  •;*•*:«"■ 


,.^  --«iJWa««^5fe«.^^*•S7••*f^>►-."'J*^if1!•; 


T-km^»fjm»aitm-r<9»'..f^,y«K^'-'~'ii  "■«««*  :■«■»««*  -^'»««M>i«i»«*j^iiiH«ii*;-- 


64 


FOREIGN    OWNERSHIP   IN    THE  PETROLEUM   INDUSTRY. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


65 


■I 


Apparently  the  meaning  of  ''juridical  persons"  in  the  Japanese 
law  is  such  that  it  is  practically  impossible  for  foreign  companies  to 
retain  or  transfer  undisputed  possession  of  mining  rights  in  that 
Empire. 

Wliile  Japanese  nationals  at  the  present  time  are  active  in  petro- 
leum development  in  eTapan,  Formosa,  China,  and  the  island  of 
Sakhalin,  the  Japanese  Government  is  said  to  be  withdrawing  from 
private  ownership  or  development  oil  fields  within  their  domain  in 
these  territories.  (See  Exhibit  11,  p.  92.)  From  1901-1907  the 
International  Oil  Co.,  a  subsidiary  of  the  Standard  Oil  Co.  of  New 
York,  controlled  producing  property  and  a  refinery  in  Japan.  In 
1907  the  former  was  absorbed  by  the  Nippon  Oil  Co. 

Russian  Sakhalin. — Russian  Sakhalin,  which  comprises  the 
northern  half  of  the  island,  has  an  approximate  area  of  15,850  square 
miles.  It  is  said  to  have  petroleum  lands  covering  3,000  square  miles 
on  its  eastern  coast  and,  in  addition,  1,500  to  2,000  square  miles  of 
supposedly  oil-bearing  lands  on  its  western  coast  not  yet  explored. 
Although  Russian  Sakhalin  can  not  yet  be  said  to  be  producing 
petroleum,  at  least  to  any  significant  extent,  the  indications  are  of 
the  most  encouraging  nature. 

An  American  company,  the  Sinclair  Consolidated  Oil  Corporation, 
recently  (1923)  secured  from  the  Russian  Government  at  Moscow 
the  prospecting  rights  to  all  of  Russian  Saklialin,  but  with  the  obliga- 
tion to  reduce  its  holdings  to  1,000  square  versts,  or  280,800  acres, 
within  five  years.     (See  Exhibit  20,  p.  127.) 


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FOREIGN    OWNERSHIP   IX   THE   PETROLEUM   INDUSTRY. 


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70  FOREIGN   OWNERSHIP  IN   THE   PETROLEUM   INDUSTRY. 

Exhibit  2. 

CIRCULAR,  UNION  OIL  CO.  OF  CALIFORNIA,  AUGUST  12,  1919. 

Union  Oil  Co.  of  California, 

Los  Angeles,  Calif.,  August  /f,  1919. 

To  the  Stockholders  of  Union  Oil  Co.  of  California: 

Pursuant  to  resolution  of  its  board  of  directors  (and  permit  having  been  duly  issued 
by  the  honorable  corporation  commissioner  of  the  State  of  California  in  that  behalf) 
Union  Oil  Co.  of  California  hereby  offers  to  the  stockholders  of  the  company  of  record 
at  Oleum,  at  the  close  of  business  on  August  20,  1919— pro  rata  in  proportion  to  their 
respective  stock  holdings — an  amount  of  its  unissued  capital  stock  equal  in  par  value 
to  14.75391  per  cent  of  the  par  value  of  its  outstanding  capital  stock,  at  par,  viz,  $100 
per  share,  payable  in  cash,  as  follows:  $25  per  share  on  or  before  September  20,  1919; 
$25  per  share  on  or  before  January  1,  1920;  $25  per  share  on  or  before  May  1,  1920; 
$25  per  share  on  or  before  September  1,  1920. 

Payments  for  stock  can  only  be  made  as  above  specified,  and  no  advance  remittance 
will  be  accepted  for  pavment  in  full  for  all  subscription  rights. 

The  stock  transfer  books  will  be  closed  from  August  20  to  27,  both  dates  inclusive, 
during  which  time  there  will  be  transmitted  to  the  respective  stockholders  transferable 
certificates  of  subscription  rights — for  whole  shares  and  fractional  shares  separately — 
showing  the  amount  of  stock  which  their  respective  stock  holding  at  the  close  of 
business  on  August  20,  1919,  will  entitle  them  to  purchase  under  this  offer. 

The  company  will  receive  no  subscriptions  for  fractional  shares  of  stock.  However, 
pro\dsion  has  been  made  whereby  each  stockholder  receiving  a  fractional  certificate 
will  be  given  the  right  and  option  either  («)  to  sell  such  fractional  certificate  of  rights; 
or  (6)  to  combine  his  fractional  rights  with  those  of  others  and  thus  secure  whole  share 
issues;  or  (r)  to  tender  such  fractional  certificate  of  rights  to  either  the  First  National 
Bank  of  Los  Angeles  or  the  Farmers  and  Merchants  National  Bank  of  I.os  Angeles  for 
purchase  by  them,  at  the  rate  of  $60  per  whole  share  right,  pursuant  to  underwriting 
agreement  hereinafter  referred  to. 

These  certificates,  both  as  to  whole  shares  and  fractional  shares,  represent  valuable 
rights  which  may  be  sold  and  transferred  when  each  shall  bo  properly  indorsed  and 
the  signature  witnessed,  or  may  be  availed  of  also  by  the  heirs  or  l^al  representatives 
of  any  stockholder. 

On  or  immediately  following  September  20,  1919,  and  the  first  days  of  January, 
May,  and  September,  1920,  stock  will  be  issued  in  full-share  certificates  for  the  full 
amount  of  stock  to  be  issued,  which  the  respective  $25  per  share  payments  due  upon— 
and  which  have  been  paid  on  or  before — such  respective  dates  will  cover.  Payment 
balances — for  which  fractional  certificates  will  not  be  issued — in  each  case  will  be 
added  to  and  applied  on  the  next  payment.  For  illustration:  A  stockholder  owning 
100  shares  of  stock  will  be  entitled  to  subscribe  for  14.75391  shares,  and  there  will 
be  issued  to  him  a  certificate  of  rights  for  14  whole  shares,  together  with  the  fractional 
share  certificate  of  rights  (w^hich  may  be  availed  of  as  above  outlined)  to  cover  his  frac- 
tional interest.  If  he  makes  all  payments  as  above  provided,  there  will  be  issued  to 
him,  on  or  immediately  following  September  20,  1919,  a  certificato  for  three  shares 
of  stock  and  $50  will  be  carried  forward  and  added  to  the  second  payment.  On  or 
immediately  following  January  1,  1920,  a  certificate  will  be  issued  for  four  shares, 
nothing  being  carried  forward  to  th«  third  payment.  On  or  immediately  following 
May  1, 1920,  a  certificate  will  be  issued  for  three' shares,  and  $50  will  be  earned  forward 
to  the  final  payment.  On  or  immediately  following  September  1,  1920,  a  certificate 
for  four  shares  will  be  issued,  making  14  shares  in  all. 

All  unused  subscription  rights  will  become  void  after  September  20,  1919,  and  in 
case  of  default  in  the  making  of  any  payment  at  the  time  herein  above  provided  for 
the  subscription  rights  to  the  amount  of  stock  represented  by  the  installments  not  paid 
at  that  time  will  also  become  void,  without  liability  of  issuance  of  any  stock  therefor, 
and  any  payment  balances  will  be  retained  by  the  company  and  become  its  property. 

The  new  capital  secured  from  this  offering  of  stock  will  be  devoted  to  the  following 
purposes: 

(a)  To  the  acquisition  of  additional  prospective  oil  territory  and  other  properties. 

(6)  To  the  work  of  drilling  and  otherwise  developing  the  properties  of  the  coni' 
pany. 

(c)  To  the  malting  of  additions  and  improvements  to,  and  extensions  of,  its  refining 
plants  and  facilities, 

{d)  To  the  acquisition  of  additional  marine  and  other  transportation  facilities. 

{e)  To  providing  additional  marketing  stations  and  facilities. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


71 


(/)  And  in  general  to  make  financial  provision  for  the  conduct  and  growth  of  the 

company's  business,  .       ,   ,  i    •      •         i 

The  stock  issued  will  be  limited  to  whole  shares— no  fractional  shares  being  issued— 
and  no  subscriptions  will  be  received  except  for  one  or  more  full  shares. 

Stockholders  desiring  to  avail  themselves  of  this  opportumty  to  increase  their 
holdin<^  upon  receiving  their  certificate  of  rights  should  detach  the  fractional  share 
certific'ate  and  sign  the  subscription  blank  on  the  back  of  the  certificate  of  whole 
share  rights  and  return  the  same,  together  with  remittance  covering  the  first  install- 
ment of  $25  per  share,  to  the  secretary  on  or  before  September  20,  1919. 

If  for  any  reason,  any  stockholder  does  not  wish  to  subscribe  for  and  purchase  the 
shares  of  stock  designated  on  his  certificate  of  rights,  he  is  at  liberty  to  sell  and  assign 
his  rights  thereunder  by  indorsing  the  same  and  having  his  signature  witnessed. 

A  group  of  responsible  financiers  have  entered  into  an  underwTitmg  agreement 
with  your  company  for  the  benefit  of  itself  and  all  and  singular  its  stockholders 
whereby,  nnder  terms  and  conditions  in  said  agreement  set  forth,  said  underwriters 
offer  to  purchase  from  any  and  all  stockholders  any  and  all  of  the  certificates  of  rights 
which  may  be  tendered  to  said  underwriters  at  any  time  on  or  before  September  20, 
1919,  on  the  basis  of  $60  per  share  right.  The  underwTiters  have  requested  that  you 
be  ad\ised  that  they  have  made  such  arrangements  that  the  First  National  Bank  or 
the  Farmers  and  Merchants  National  Bank,  in  the  city  of  Los  Angeles,  will,  at  any 
time  during  business  hours  and  before  noon  of  the  20th  day  of  September,  1919,  pur- 
chase at  the  above  price  and  pav  for  all  certificates  of  rights,  whether  whole  or  frac- 
tional, upon  delivery  to  the  bank  of  said  certificates  of  rights  properly  indorsed  and 

witnessed. 

In  case  anv  stockholder  shall  not  desire  to  sell  or  dispose  of  his  whole  share  subscTip- 
tion  rights  the  fractional  share  subscription  rights  can  be  detached  and  handled  as 

hereinbefore  soecified. 

Permit  has  been  issued  by  the  honorable  corporation  commissioner  for  sale  of  the 
remaining  64,285  shares  of  unissued  capital  stock  of  your  company.  All  of  said  stock 
not  sold  to  stockholders  or  their  heirs  or  assigns,  pursuant  to  this  offering,  may  be 
disposed  of  by  the  company  at  any  time  and  to  any  parties  and  for  such  considera- 
tions and  on  such  terms  as  your  board  of  directors  shall  deem  advantageous,  but  so 
as  to  net  the  company  at  least  $100  per  share. 

By  order  of  the  board  of  directors. 

John  McPeak,  Secretary. 


Exhibit  3. 


CIRCULARS,  UNION  OIL  CO.,  AUGUST  17,  1922. 

Notice  to  Stockholders  Respecting  Right  to  Subscribe  to  Stock  in  Shell 

Union  Oil  Corporation. 

Union  Oil  Co., 
New  York,  August  17,  1922. 
To  the  Stockholders  of  Union  Oil  Co.: 

In  accordance  with  the  accompanying  circular,  this  company  hereby  offers  139,000 
shares  of  common  stock  (no  par  value)  of  Shell  Union  Oil  Corporation  for  subscription 
at  $12  per  share  to  the  holders  of  the  issued  and  outstanding  stock  of  this  company  at 
the  close  of  business  on  August  30,  1922,  at  the  rate  of  1  share  of  said  common  stock  in 
Shell  Union  Oil  Corporation  for  each  10  shares  of  stock  in  this  company  held  by  them 
at  said  date. 

A  dividend  of  25  cents  per  share  has  been  declared  upon  each  share  of  said  common 
stock  of  Shell  Union  Oil  Corporation,  payable  September  30,  1922,  to  stockholders  of 
record  at  the  close  of  business  on  September  20,  1922. 

Stockholders  may  subscribe  for  more  than  their  pro  rata  share  of  said  shares  of  said 
common  stock  in  Shell  Union  Oil  Corporation,  and  the  shares  of  such  stock  not  sub- 
scribed for  by  reason  of  stockholders  not  taking  their  entire  pro  rata  share  will  be 
allotted  proportionately  to  stockholders  subscribing  for  more  than  their  pro  rata  share. 

Subscriptions  to  said  shares  of  said  common  stock  in  Shell  Union  Oil  Corporation 
must  be  made  in  the  manner  hereinafter  set  forth  at  the  office  of  Guaranty  Trust  Co.  of 
New  York,  No.  140  Broadway,  Borough  of  Manhattan,  New  York  City,  at  or  before  3 
p.  m.  on  September  18,  1922. 

No  subscription  or  assignment  or  any  right  to  subscribe  will  be  recognized  unless 
made  on  the  forms  and  in  the  manner  prescribed  by  this  company.  Fractional  war- 
rants will  be  issued,  but  no  subscription  may  be  made  on  such  fractional  warrants 
alone,  and  unless  fractional  warrants  be  surrendered  with  other  fractional  warrants 
aggr^^ting  one  or  more  full  shares  they  will  become  wholly  void.     Neither  this 


i 


•  *-.- •rv'?»'-A'-t«rx-- 


L.  m} .  'wiji— iwi 


72 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


company  nor  Guaranty  Trust  Co.  of  New  York  will  buy  or  sell  whole  or  fractional 
subscription  rights. 

The  full  subscription  price  of  $12  for  each  share  of  said  common  stock  in  Shell 
Union  Oil  Corporation  will  be  payable  at  or  before  3  p.  m.  on  September  IS,  1922,  and 
payment  must  be  made  at  or  before  said  date  at  said  office  of  Guaranty  Trust  Co.  of 
New  York. 

The  stock  transfer  books  of  this  company  will  not  be  closed  in  connection  with  the 
offer  herein  contained. 

Subscription  warrants  entitled  ** Series  A,"  specifying  the  number  of  shares  of  said 
common  stock  in  Shell  Union  Oil  Corporation  for  which  the  stockholders  of  this  com- 
pany are  entitled  to  subscribe  in  accordance  with  this  offer,  and  subscription  blanks 
entitled  "Series  B"  for  use  by  stockholders  desiring  to  subscribe  for  more  than  their 
pro  rata  share,  will  be  mailed  to  stockholders  as  soon  after  August  30,  1922,  as  practi- 
cable. 

Each  subscription  warrant,  "Series  A,"  and  each  subscription  blank,  "Series  B," 
should  be  accompanied  by  a  certified  check  in  New  York  City  funds  payable  to  the 
order  of  Guaranty  Trust  Co.  of  New  York,  for  the  amount  of  stock  subscribed  for  on 
each  warrant  ana  blank. 

Should  any  stockholder  not  receive  the  full  amount  of  stock  subscribed  for  by  him 
on  subscription  blank,  "Series,  15, "  the  amount  paid  by  him  for  stock  not  received  will 
be  refunded  to  him  by  Guaranty  Trust  Co.  of  New  York. 

Temporary  certificates  for  said  common  stock  in  Shell  Union  Oil  Corporation  will 
be  issued  on  the  receipt  of  the  subscriptions  and  the  payment  in  full  of  the  amounts 
payable  thereon. 

My  order  of  the  board  of  directors. 

W.  C.  Stagg, 
Secretary  of  Union  Oil  Company. 


Union  Oil  Co., 
New  York,  August  17,  1922. 
To  the  stockholders  of  Union  Oil  Co.: 

In  accordance  with  previous  communications  to  you  and  with  the  expressed  desire 
of  many  stockholders,  your  board  of  directors  are  pleased  to  announce  that  arrange- 
ments have  been  made  which  will  permit  a  distribution  to  the  stockholders  of  Union 
Oil  Co.  of  the  shares  of  common  stock  of  Shell  Union  Oil  Corporation  held  by  this 

company. 

Because  Union  Oil  Co.  has  been  unable  to  sell  ita  two  10,000-ton  tankers,  and  there 
appears  to  be  no  likelihood  of  a  sale  thereof  on  advantageous  terms  in  the  near  future. 
Union  Oil  Co.  in  order  to  pay  the  balance  of  its  bank  loans  has  decided  to  offer  to  its 
stockholders  139,000  shares  of  common  stock  (no  par  value)  of  Shell  Union  Oil  Cor- 
poration at  $12  a  share.  This  entire  offering  has  been  underwritten  without  commis- 
sion or  cost  to  Union  Oil  Co.  at  the  said  price  of  $12  per  share.  A  dividend  of  25  cents 
a  share  has  been  declared  on  said  common  stock  of  Shell  Union  Oil  Corporation,  payr 
able  September  30,  1922,  to  stockholders  of  record  at  the  close  of  business  on  September 
20,  1922.  The  portion  of  such  dividend  receivable  by  Union  Oil  Co.,  except  so  much 
thereof  as  is  payable  in  respect  to  said  139,000  shares,  will  be  retained  by  Union  Oil 
Co.  in  its  treasury. 

It  is  intended  at  an  early  date  after  the  completion  of  the  sale  of  these  shares  to  make 
a  distribution  to  each  stockholder  of  Union  Oil  Co.  of  one  and  a  half  shares  of  said 
common  stock  of  i^hell  Union  Oil  Corporation  for  each  share  of  stock  of  Union  Oil  Co. 
held  by  him. 

Union  Oil  Co.  has  been  advised  that  application  will  shortly  be  made  to  list  the  said 
common  stock  of  Shell  Union  Oil  Corporation  upon  the  New  York  Stock  Exchange. 

After  the  application  of  the  proceeds  of  the  sale  of  said  139,000  shares  of  stock  to  the 
liabilities  of  Union  Oil  Co.  there  will  remain  certain  liabilities  for  taxes  and  other 
obUgatious,  the  exact  amount  of  which  can  not  now  be  fixed,  but  which  it  is  confidently 
expected  will  be  substantially  less  than  the  amount  which  should  be  realized  from  the 
sale  of  the  two  10,000-ton  tankers  and  other  assets  of  Union  Oil  Co.  not  yet  disposed  of; 
so  that  on  the  final  dissolution  of  Union  Oil  Co.  there  may  be  a  cash  dividend  payable 
to  the  stockholders  in  addition  to  the  distribution  of  said  common  stock  of  Shell  Union 
Oil  Corporation  hereinbefore  referred  to. 

There  is  annexed  hereto  a  statement  respecting  Shell  Union  Oil  Corpjoration,  to  the 
shares  of  stock  of  which  you  are  hereby  ^iven  an  opportunity  to  subscribe. 

There  is  inclosed  herewith  a  notice  giving  in  detail  the  terms  of  the  subscription 
privilege  and  the  manner  of  exercising  the  same. 

By  order  of  the  board  of  directors. 

James  H.  Brookmire,  President. 


*>-   .^  ■  <► 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 

Exhibit  4. 


73 


AGREEMENT  BETWEEN  UNION  OIL  CO.  (DELAWARE)  AND  ANGLO-SAXON 

PETROLEUM  CO.  (LTD.),  OCTOBER  19,  1921. 

Agreement  dated  October  19,  1921,  between  Union  Oil  Co.,  a  Delaware  corporation, 
herein  called  the  "Delaware  company,"  of  the  first  part,  and  Anglo-Saxon  Petroleum' 
Co.  (Ltd.),  a  British  corporation,  herein  called  the  "Anglo-Saxon,"  of  the  second 
part,  which  has  been  authorized  to  enter  into  this  agreement  by  the  Royal  Dutch 
Co.,  the  Shell  Transport  &  Trading  Co.  (Ltd.),  and  the  Dundee  Petroleum  Corpora- 
tion (Ltd.). 

RECITALS. 

The  parties  hereto  have  determined  to  vest  certain  of  their  American  share  holdings 
and  certain  of  the  properties  of  the  Delaware  company  in  a  new  company  in  the 
manner  set  forth  in  the  following  plan  and  agreement,  provided  the  approval  of  the 
stockholders  of  the  Delaware  company  and  of  tae  Anglo-Saxon  be  first  obtained  as 
hereinafter  provided: 

PLAN. 

I.  A  corporation,  in  this  plan  called  the  "Consolidated  company,"  shall  be  organ- 
ized and  shall  acquire  and  hold  all  of  the  shares  of  stock  of  Union  Oil  Co.  of  California, 
a  California  corporation,  which  are  now  owned  by  the  Delaware  company;  the  con- 
tract executed  July  12,  1920,  between  the  Delaware  company  and  the  Texas  Co  ,  a 
Texas  corporation,  respecting  the  Central  Petroleum  Co..  herein  called  the  Central 
Petroleum  contract  and  all  of  the  issued  and  outstanding  shares  of  stock  of  the  follow- 
ing corporations,  with  the  exception  noted: 

1.  Shell  Co.  of  California,  a  California  corporation,  herein  called  the  "Shell  Co  " 
(excepting  16.35  shares  of  stock  of  the  said  corporation). 

2.  Roxana  Petroleum  Corporation,  a  Virginia  corporation,  herein  called  the 
^'Roxana  Co," 

3.  Ozark  Pipe  Line  Corporation,  a  Maryland  corporation,  herein  called  the  "Ozark 
Co. 

4.  Matador  Petroleum  Co.,  a  Wyoming  corporation,  herein  called  the  "Matador 
Co." 

Prior  to  the  acquisition  by  the  Consolidated  company  of  the  shares  of  stock  of  the 
Shell  Co.  there  shall  be  withdrawn  from  the  Shell  Co.'s  treasury  the  Trumble  patents 
(the  Shell  Co.  shall  retain  for  itself  the  right  to  use  within  the  United  States  of  America 
the  processes  covered  by  said  patents  and  any  improvements  that  may  be  made 
therein  by  the  owner  of  said  patents  or  which  it  may  otherwise  acquire  by  the  pay- 
ment of  a  license  fee  of  $1,000  per  year  during  the  life  of  the  said  patents,  and  there 
shall  be  secured  to  the  Roxana  Co.  the  right  to  use  said  processes  during  the  life  of 
said  patents  upon  the  terms  and  conditions  of  the  existing  contract  between  it  and 
the  Shell  Co.)  and  all  of  the  shares  of  stock  of  the  following  companies  owned  by  it- 
Gold  Shell  Steamship  Co.,  Silver  Shell  Steamship  Co.,  Pearl  Shell  Steamship  Co 
all  California  corporations;  Asiatic  Petroleum  Co.  (New  York)  (Ltd.),  a  New  York 
corporation;  New  Orleans  Refining  Co.,  a  Louisiana  corporation. 

II.  The  properties  of  the  Delaware  company  owned  or  controlled  by  it,  through  its 
ownership  of  stock  in  subsidiary  corporations,  and  hereinafter  generally  described 
shall  be  vested  in  the  Shell  Co.  and  in  the  Roxana  Co.,  respectively,  as  follows:       ' 

(A)  In  the  Shell  Co.:  All  of  the  property  and  assets,  subject  to  specified  liabilities 
hereinafter  mentioned,  of — 

1.  Columbia  Oil  Producing  Co.,  a  California  corporation,  herein  called  the  "Colum- 
bia Co." 

2.  Western  Union  Oil  Co.,  a  California  corporation,  herein  called  the  "Wefetern 
Union  Co." 

.c^r  V^l^^^  Western  Consolidated  Oil  Co.,  a  Wyoming  corporation,  herein  called  the 
''United  Western  Co." 

4.  Dunlop  Oil  Co.,  a  California  corporation,  herein  called  the  "Dunlop  Co." 

5.  All  of  the  oil  and  gas  properties,  stocks  of  oil  and  other  products,  consumable 
stores,  machinery,  tools,  equipment,  and  other  facilities  situated  in  California  owned 
by— 

(a)  Eddystone  Oil  Corporation,  a  Delaware  corporation,  herein  called  the  "Eddv- 
etone  Co."  ^ 

(6)  Commonwealth  Petroleum  Co.,  a  Delaware  corporation,  herein  called  the 
"Commonwealth  Co." 

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FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


(c)  National  Exploration  Co.,  a  Delaware  corporation,  herein  called  the  "Explora- 
tion Co." 

(B)  In  the  Roxana  Co.:  1.  All  of  the  property  and  assets  of  the  Exploration  Co., 
except  oil  and  gas  properties  and  facilities  situated  in  California  and  Kentucky. 

2.  All  of  the  oil  and  gas  properties  and  facilities  of  the  Commonwealth  Co.  situated 
in  Texas. 

3.  All  of  the  oil  and  gas  properties,  stocks  of  oil  and  other  products,  consumable 
stores,  machinery,  tools,  equipment,  and  other  facilities  of  the  Eadystone  Co.,  situated 
in  Oklahoma  and  Kansas. 

-  III.  The  Anglo-Saxon  shall  receive  as  consideration  for  the  transfer  and  delivery 
by  it  to  the  Consolidated  company,  as  hereinbefore  provided,  of  the  shares  of  stock  of 
the  Shell  Co.,  the  Roxana  Co.,  the  Ozark  Co.,  and  the  Matador  Co.,  5,760,000  shares  of 
the  nonpar  value  stock  of  the  Consolidated  company. 

The  Delaware  company  shall  receive,  as  consideration  for  the  transfer  and  delivery 
by  it  to  the  Consolidated  company,  as  hereinbefore  provided,  of  the  shares  of  stock 
of  the  said  Union  Oil  Co.  of  California,  its  right,  title,  and  interest  in  the  said  Central 
Petroleum  Co.  <x)ntract  and  the  transfer  ana  conveyance  by  the  Delaware  company 
to  the  Shell  Co.  and  the  Roxana  Co.  of  the  property  and  assets  of  the  Delaware  com- 
pany's subsidiary  corporations,  hereinbefore  specified,  2,240,000  shares  of  the  nonpar 
value  stock  of  the  Consolidated  company,  $380,220.70  in  cash,  and  the  assumption  of 
the  debt  hereinafter  mentioned. 

The  Consolidated  company  shall  receive  from  the  Shell  Co.  for  causing  the  Delaware 
company  to  transfer  to  tne  Shell  Co.  the  properties  and  assets  hereinbefore  described, 
approximatelv  150,000  shares  of  the  Shell  Co.'s  stock  and  shall  receive  from  the 
Roxana  Co.  the  properties  and  assets  hereinbefore  described,  approximately  140,000 
shares  of  the  Roxana  Co.'s  common  stock. 

Now  therefore,  in  consideration  of  the  premises  and  the  mutual  covenants  herein- 
after contained  it  is  agreed  by  the  parties  hereto  as  follows: 

First.  The  foregoing  plan  and  this  agreement  shall  be  submitted  to  the  stockholders 
of  the  Anglo-Saxon  and  the  Delaware  company  for  their  approval  at  as  early  a  date 
as  may  be  practicable,  and  if  and  when  such  approval  is  given  in  the  case  of  the  Dela- 
ware company,  as  required  by  the  laws  of  the  State  of  Delaware,  a  corporation  shall 
be  organized  by  the  Delaware  company,  under  the  laws  of  Delaware,  with  such  name 
as  may  be  agreed  on,  herein  called  the  "Consolidated  company,"  having  an  author- 
ized capital  stock  of  10,000,000  shares,  of  no  par  value,  of  which  8,000,oS)  shares  will 
be  issued  under  the  provisions  hereof.  The  Anglo-Saxon  shall  submit  said  plan  and 
this  agreement  to  its  stockholders  for  approval  at  least  48  hours  prior  to  the  date  of 
the  meeting  of  the  stockholders  of  the  Delaware  company,  the  date  of  which  meeting 
shall  be  cabled  to  the  Anglo  Saxon  at  least  18  days  in  advance.  The  result  of  the 
Anglo-Saxon  meeting  shall  forthwith  be  reported  to  the  Delaware  company. 

Second.  After  the  Consolidated  company  shall  have  been  organized,  and  at  such 
date  as  the  Delaware  company  may  appoint  to  be  herein  referred  to  as  the  "closing 
date,"  but  not  later  than  December  31,  1921,  unless  such  date  be  adjourned  as  here- 
inafter provided  or  the  parties  hereto  shall  otherwise  agree,  the  Anglo-Saxon,  at  the 
request  of  the  Consolidated  company,  shall  cause  to  be  transferred  and  delivered  to 
the  Consolidated  company  all  of  the  shares  of  stock  which  are  issued  and  outstanding 
at  the  date  hereof  of  the  Shell  Co.,  the  Roxana  Co.,  the  Ozark  Co.,  the  Matador  Co. 
(except  the  said  16.35  shares  of  stock  of  the  Shell  Co.  and  such  shares  of  stock  of  the 
Shell  Co.  and/or  the  Roxana  Co.  as  at  the  date  of  transfer  may  be  held  by  one  or  other 
of  the  said  corporations),  and  an  agreement  in  writing  guaranteeing  to  the  Consolidated 
company  that  the  aforesaid  corporations  have  no  liabilities,  direct  or  contingent, 
express  or  implied,  exc^t  as  stated  on  Schedule  "  B, "  hereinafter  referred  to,  subject 
to  such  changes  as  may  have  taken  place  between  May  31,  1921,  and  the  closing  date, 
as  a  result  of  transactions  in  the  regular  course  of  business,  and  in  pursuance  of  an 
agreement  dated  16th  September,  1921,  between  the  Roxana  Co.  and  E.  W.  Marland 
(herein  called  the  Marland  contract)  and  shall  procure  the  Shell  company  and  the 
Roxana  company  to  issue  to  the  Consolidated  company  the  150,000  shares  and  140,000 
shares,  respectively,  of  their  respective  capital  stocks  referred  te  in  the  said  plan  in 
consideration  of  the  issue  and  delivery  to  theAnglo-Saxon  or  their  nominees  of  5,760,000 
shares  of  the  Consolidated  company's  non-par  value  stock,  the  same  to  be  full  paid 
and  nonassessible.  Particulars  of  the  properties  and  assets  of  these  corporations  as 
at  31st  of  May,  1921,  are  contained  in  the  inventories  which  were  submitted  to  the 
representatives  of  the  Delaware  company  by  representatives  of  the  Anglo-Saxon  in 
America  in  or  about  June,  1921. 

Contemporaneously  with  such  transaction,  the  Delaware  company  shall — 

(a)  Assign,  transfer,  and  deliver  to  the  Consolidated  company  130,869  shares  of 
stock  of  the  Union  Oil  of  California  and  all  of  its  right,  title  and  interest  in  and  to  the 
Central  Petroleum  contract. 


( 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


75 


•   (J)  Transfer  and  convey  to  the  Shell  Co.  free  of  all  liabilities  of  every  description 
including  liability  for  taxes  and  contracts  for  the  disposal  of  the  oil  produced  therefrom' 
other  than  the  liabilities  hereinafter  referred  to,  all  of  the  propertv  and  assets  of  the 
Columbia  Co.,  the  United  Western  Co.,  the  Dunlop  Co.,  the  Western  Union  Co 
AH  of  the  oil  properties,  stocks  of  oil,  and  other  products  consumable,  stores,  machin- 
ery, tools,  equipment,  and  other  facilities  located  in  California  of  the  Exploration  Co 
the  Commonwealth  Co.,  the  Eddvstone  Co. 

(c)  Transfer  and  convey  to  the  Roxana  Co.  free  of  all  liabilities  of  every  description 
including  liability  for  taxes  and  contracts  for  the  disposal  of  the  oil  produced  therefrom 
other  than  the  liabilities  referred  to  in  Schedule  A.  All  of  the  Exploration  Co  's 
property  and  assets  outside  of  California  and  Kentuckv,  subject  to  the  specified 
liabilities  referred  to  m  Schedule  A .  All  of  the  Eddystone  Co.  's  oil  properties,  stocks 
of  oil  and  other  products  consumable,  stores,  machinery,  tools,  and  equipment 
and  other  facilities  m  Oklahoma  and  Kansas,  subject  to  the  specified  liabilities  referred 
to  in  Schedule  A.  All  of  the  Commonwealth  Co.'s  oil  properties  and  facilities  in 
lexas,  in  consideration  of  the  Consolidated  company  issuing  and  delivering  to  the 
Delaware  company  2,240,000  shares  of  its  nonpar  value  stock,  the  same  to  be  full  paid 
and  nonassessable,  paying  to  the  Delaware  company  the  sum  of  $386,220  70  in  cash 
and  assuming  $777,777  of  the  debts  owing  by  the  Delaware  company  to  certain  bank- 
ing institutions  in  the  city  of  New  York  and  causing  the  Delaware  company  to  be  re- 
leased therefrom  to  such  extent.  f     j'    w  uc  le 

ParticulMs  of  the  properties  ^nd  assets  referred  to  in  subclauses  (6)  and  (c)  are  con- 
fined m  the  inventories  which  were  submitted  to  the  representati\  es  of  the  Anglo- 
^iZ^  V  reP^esentatiyes  of  the  Delaware  company  in  America  in  or  about  June,  1921 

ihird.  Ihe  books  of  account  of  all  the  corporations  subject  in  whole  or  in  part  to 
the  proposed  consolidation,  \vith  the  exception  of  the  Union  Oil  Co.  of  California  have 
been  audited  by  the  accountants  selected  by  both  parties  hereto,  and  as  a  result  of 
SUCH  audit  the  liabilities  and  current  assets  of  such  corporations,  other  than  the  Eddv- 
!^°!»  o  ;T  i^®  Commonwealth  Co  have  been  agreed  on  by  the  parties  hereto  and 
are  as  set  forth  on  Schedules  A  and  B  hereto  annexed.  Schedule  A  relating  to  the 
corporations  owned  or  controlled  by  the  Delaware  company  and  Schedule  B  to  the 
corporations  referred  to  in  the  first  part  of  clause  2  hereof. 

From  these  schedules  it  appears  that  the  current  assets  of  the  Columbia  Co     the 
Western  Union  Co.,  the  United  Western  Co.,  the  Dunlop  Co.,  and  the  Exploration  Co 
as  on  May  31  1921,  exceed  their  liabilities  by  $386,220.70  and  the  conilidated  com- 
pany at  the  closing  date  shall  pay  said  sum  to  the  Delaware  company  in  cash  as  here- 
inbefore provided. 

At  the  closing  date  all  properties  acquired  by  the  consolidated  companv,  whether 

fk""^^^  ?[  ^^^"^  ^l^  T^  ""^  ^^?  ?^^"  ^^-^  ^^^  ^^^^k  <^«  '  the  I^^ana  Corporation,  and 
tne  Matador  Co.,  by  the  acquisition  of  shares  of  stock  of  the  corporations  which  owti 
such  properties  (exclusive  of  the  oil  properties  and  facilities  of  the  Eddystone  Co  in 
^  alifomia   Oklahoma,  and  Kansas,  and  the  oil  properties  and  facilities  of  the  Com- 

Mo,^  qT*  1091  'H  Tif  ""f-^^x^M^*."  ^^  acquired  as  going  concerns,  as  the  same  existed  on 
May  diiy^l,  with  the  liabihties  and  current  assets  as  the  same  are  shown  on  Schedules 
A  and  B,  subject,  however,  to  the  results  of  all  transactions  had  in  connection  with  the 
f^J^lT  'f  n  P^^Pe^^ties  from  said  May  31,  1921,  to  the  closing  date,  provided  such 
transactions  shall  have  been  made  m  the  usual  course  of  business  or  if  not  shall  have 
heen  approved  by  the  parties  hereto. 
The  following  transactions  had  since  May  31,  1921,  are  hereby  approved  bv  the 

&^Lrbv  tr^FH?".^"'Jf^^^"^'^^^  "^^.^^  ^y  '^'  «^^^^^  (-o^nTthe  pur^ha^e 
^if  \X  ,  ^^^y«^°e  <^o  of  an  interest  in  a  lease  of  lands  in  Osage  County  Okla 
tiZ=  I^elaware  company  shall  be  entitled  to  charge  to  and  collect'from  the  corpora- 
Ma  v%7?Q9Vnn^']  J?"  ^?  ^^  '*7^¥  properties  are  subject  to  the  consolidation,  from 
amnnnt  f rn  ri'T  I.  •  "^'T'l^  ^^^'  ^"^  not  later  than  December  31,  1921,  a  reasonable 
inth^rU^Z^  administrative  expenses  of  the  head  office  of  the  Delaware  company 
I.nnil!  Zl  •  ^^"^  •^^'■^'  «"ch, charges  to  be  deemed  expenses  incurred  in  the  usual 
course  of  business,  in  contemplation  of  this  agreement 

oiJi^lZfcf''^  ^  ^^  ""'^  properties  and  facilities  of  the  Eddystone  Co.  in  California 
Oklahoma,  and  Kansas,  the  accountants  of  the  parties  hereto  shall  jointly  make  and 
agtee  upon  an  audit  as  of  May  31,  1921,  of  the  operations  of  such  oTpmpenies  and 
i^H  it.h^''?  each  such  operation  shall  be  thereafter  considered  as  a  going  concern 
?nAn  ^^  '^^'"''''^  ^^^  ^.^?  Consolidated  company  shall  reimburse  the  Eddystone  Co 
for  all  moneys  expended  in  connection  with  such  properties  and  operat^ns  by  it  hi 
the  usual  course  of  busmess  from  May  31,  1921,  to  the  closing  date  and  not  realized 
beZestetJ^  ''  '"'^"^'^^  '""''"y'  ""P"°^"^  ^y  ^^  Eddystone  txLTerefn 


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76 


FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


All  net  profits,  if  any,  from  such  operations  during  this  period  shall  become  the 
property  at  the  closing  date  of  the  Shell  Co.  or  the  Roxana  Co.,  as  the  case  may  be. 

The  Texas  oil  properties  and  facilities  of  the  Commonwealth  Co.  shall  be  transferred 
and  conveyed  as  they  exist  on  the  closing  date  without  any  adjustment  as  to  the  result 
of  the  operations  thereof,  if  any  there  b^. 

The  Anglo-Saxon  so  far  as  it  is  legally  able  to  do  so  will  procure  that  the  Consolidated 
company  shall  acquire  from  the  present  owners  the  various  Shell  marks  set  out  in 
Schedule  C  and  the  right  to  use  the  same  in  connection  with  the  oil  products  mentioned 
in  the  schedule  sold  and  consumed  in  the  United  States  of  America.  The  considera- 
tion payable  by  the  Consolidated  company  shall  be  the  sum  of  $2,000. 

Fourth.  The  Delaware  company  represents  that  since  May  31,  1921,  it  has  not, 
except  as  hereinbefore  stated,  and  until  the  closing  date  it  will  not  permit  any  of  its 
subsidiary  corporations  whose  properties  are  to  be  included  in  whole  or  in  part  in  the 
proposed  consolidation  except  in  the  usual  course  of  business  or  permit  any  liens  or 
encumbrances  to  be  placed  on  such  properties.  Likewise,  the  Anglo-Saxon  repre- 
sents that  since  May  31,  1921,  it  has  not  and  until  the  closing  date  shall  not  permit  any 
of  the  corporations  which  are  to  be  included  in  the  proposed  consolidation  to  enter 
into  any  contracts  or  create  any  obligations  for  the  payment  of  money  or  otherwise 
or  dispose  of  any  of  their  properties,  except  in  the  usual  course  of  business,  and  as 
hereinbefore  required  in  clause  1  of  the  said  plan  in  the  case  of  the  Marland  contract, 
or  permit  any  hens  or  encumbrances  to  be  placed  on  such  properties. 

In  the  case  of  all  leases,  contracts,  and  other  instruments  assigned  to  the  Shell  Co. 
and  the  Roxana  Co.  by  the  Delaware  company  or  any  of  its  subsidiaries  hereunder 
wherein  are  expressed  obligations  to  be  performed  by  the  Delaware  company  or  any 
of  its  subsidiaries  particulars  of  which  are  set  out  in  schedule  A,  the  Shell  Co.  and/w 
the  Roxana  Co.  shall  execute  and  deliver  to  the  Delaware  company  on  the  closing  date 
instruments  in  writing  agreeing  to  assume  and  perform  such  obligations  or  accepting 
liability  for  nonperformance. 

Fifth:  At  the  closing  date,  the  Delaware  company  shall  cause  to  be  elected  to  the 
board  of  directors  of  the  Consolidated  company,  which  board  shall  consist  of  not 
more  than  19  members,  14  individuals  to  be  nominated  by  the  Anglo-Saxon  and  5 
individuals  to  be  nominated  by  the  Delaware  company.  At  the  same  time  the  Anglo- 
Saxon  shall  cause  to  be  elected  to  the  respective  boards  of  directors  of  the  Shell  Co., 
the  Roxana  Co.,  the  Ozark  Co.,  and  the  Matador  Co.  such  individuals  as  the  Con- 
solidated company  shall  nominate. 

Sixth.  Should  the  Delaware  company  be  unable  on  or  before  December  31,  1921 — 
owing  to  the  opposition  of  stockholders  in  its  subsidiary  corporations  or  for  any  other 
reason  beyond  its  control — to  cause  the  properties  or  any  of  them  which  it  is  herein 
obligated  to  transfer  and  convey  to  the  Shell  Co.  and/or  the  Roxana  Co.,  to  be  so 
transferred  and  conveyed,  the  Delaware  company  shall  be  entitled  to  adjournments  of 
such  closing  date,  provided  a  request  in  writing  is  made  for  such  adjournments  ad- 
dressed to  the  representative  of  the  Anglo-Saxon  in  the  city  of  New  York  at  least  two 
weeks  prior  to  December  31,  1921.  Adjournments  so  granted  shall  not  exceed  in  the 
aggregate  a  period  of  six  months. 

Should  the  Delaware  company  be  unable — owing  to  the  opposition  of  stockholders 
in  the  Exploration  company  or  for  any  other  reason  beyond  its  control — to  transfer 
and  convey  the  properties  of  the  Exploration  company  to  the  Consolidated  company 
on  or  before  the  closing  date  or  any  adjournment  thereof,  such  failure  shall  not  operate 
as  a  rescision  of  this  contract,  but  the  stock  receivable  by  the  Delaware  company 
hereunder  shall  be  reduced  by  300,000  shares. 

Seventh.  The  charter,  by-laws,  and  all  corporate  proceedings  of  the  Consolidated 
company  and  all  corporate  proceedings  by  which  the  Delaware  company  vests  the 
securities  and  contractual  interests  owned  by  it  in  the  Consolidated  company  and  the 
properties  of  its  subsidiary  corporations  in  the  Shell  Co.  and  the  Roxana  Co.  shall  be 
subject  to  the  approval  of  counsel  app(^)inted  for  the  purpose  by  the  Anglo-Saxon. 

Eighth.  The  cost  of  the  organization  of  the  Consolidated  company,  the  issue  of  its 
capital  stock,  and  all  of  its  corp>orate  transactions  necessary  in  the  carrying  out  of 
said  plan  and  this  agreement,  including  counsel  fees  of  the  Anglo-Saxon  and  the  Dela- 
ware company  in  such  connection,  shall  be  charged  to  and  borne  by  the  Consolidated 
company.  # 

Ninth.  Instruments  of  conveyance  and  transfer  and  guaranty  and  securities  to  be 
transferred  and  delivered  by  the  Delaware  company  to  the  Consolidated  company 
and  its  subsidiaries  and  the  cash  payment  to  be  made  as  hereinbefore  provided  shall 
be  so  transferred,  delivered,  and  made  in  the  city  of  New  York,  and  the  securities 
receivable  therefor  from  the  Consolidated  company  shall  be  delivered  in  said  city. 
The  securities  and  contract  of  guaranty  to  be  delivered  by  the  Anglo-Saxon  to  tlie 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


77 


!f 


Cons^lidatei  company  and  the  securities  receivable  therefor  from  the  Consolidated 
compaay  shall  be  delivered  in  the  city  of  London. 

Tenth.  The  Anglo-Saxon  hereby  designated  and  appoints  Gen.  Avery  D.  Andrews 
as  Its  acent  and  representative  in  the  United  States  of  America  to  consider  and  deter- 
mine on  behalf  of  the  Anglo-Saxon  any  question  arising  in  connection  with  the  carrying 
out  of  the  Slid  plan  and  agreement  which  shall  not  require  to  bo  arbitrated  as  herein- 
after pro\ided. 

Eleventh.  The  parties  hereto  shall  use  their  best  endeavors  to  carry  out  the  said 
plan  and  this  agreement  in  accordance  with  the  intent  and  purpose  thereof.  If,  in 
the  fourse  of  so  doing,  there  shall  arise  situations  not  specifically  covered  by  the 
provisions  hereof  or  not  heretofore  contemplated  and  the  parties  hereto  shall  not  be 
able  to  HQTce  on  a  solution  of  any  such  situation,  the  controversy  so  resulting  shall  be 
referred  for  do  ision  to  three  arbitrators  in  the  United  States  of  America—one  to  be 
appointed  by  the  Anelo  Saxon,  one  to  be  appointed  by  the  Delaware  company,  and 
the  third  to  be  appointed  by  the  two  so  selected.  Should  the  two  arbitrators  first 
appointe  1  be  unable  to  agree  on  a  third  arbitrator,  then  such  third  arbitrator  shall  be 
appointed  by  the  president  for  the  time  being  of  the  chamber  of  commerce  in  the 
(it/  of  New  York.  The  decision  of  a  majority  of  the  arbitrators  so  appointed  in 
rcspo  t  to  anv  such  controversy  shall  be  binding  on  the  parties  hereto. 

Twelfth.  Should  the  Delaware  company  within  the  period  herein  provided  be 
unable  for  any  reason  bevond  its  control— such  expression  being  intended  to  include 
dolavs  occasioned  by  minority  stockholders  of  subsidiary  corporations  of  the  Dela- 
ware (ompanv  who  may  refuse  to  participate  in  the  proposed  consolidation  or  to 
dispose  of  their  shares  of  stock  except  upon  exorbitant  terms— to  assign,  transfer, 
and  convey  to  the  Consolidated  company  all  of  the  securities,  properties,  and  assets 
which  It  has  been  agreed  to  so  assign,  transfer,  and  convev  hereunder  other  than  the 
prorerties  of  the  Exploration  Co.,  it  shall  not  be  liable  in  damages  to  the  Anglo-Saxon 
for  failure  so  to  do,  but  the  Anglo-Saxon  shall  have  the  option  to  be  exercised  in 
writing  to  the  Delaware  company  on  the  closing  date  either: 

(a)  To  require  the  Delaware  company  forthwith  to  deliver  to  the  Consolidated 
company  in  liou  of  said  properties  all  of  the  capital  stock  controlled  by  it  of  the  sub- 
sidi iry  company  which  owns  the  properties  or  assets  in  question  free  of  all  encum- 
brdnce^",  liens,  or  other  liabilities,  except  as  set  forth  in  schedule  A,  in  which  event 
the  Delaware  company  will  do  everything  in  its  power  to  facilitjate  the  transfer  of  the 
said  properties  or  assets;  or  (6)  should  the  value  of  the  properties  and  assets  which  the 
Delaware  company  is  unable  to  so  transfer  and  convey  be  in  excess  of  5  per  cent  in 
value  of  the  total  value  of  all  of  the  properties  and  assets  to  be  so  transferred  and 
conveyed  by  it  hereunder,  exclusive  of  the  Exploration  Co.,  to  be  released  from  all 
its  obligations  hereundor.  In  the  event  of  the  Delaware  company  being  unable  to 
transfer  and  d(;liver  to  the  Consolidated  company  5  per  cent  in  value  of  all  the  prop- 
erties and  assets  to  bo  transferred  and  conveved  by  it  hereunder,  exclusive  of  the 
Exploration  Co.,  or  any  lesser  percentage  thereof,  there  shall  be  deducted  from  the 
shares  of  stock  ol  the  Consolidated  company  receivable  by  the  Delaware  company 
hereunder  such  an;ount  as  shall  be  agreed  on  by  the  parties  hereto,  or,  failing  such 
agreement,  as  shall  be  determined  by  arbitration  under  paragraph  11  hereof. 
Thirtoonth.  The  Delaware  company  will  use  its  best  endeavors  to  procure: 

(a)  That  the  lease  lately  held  by  the  Western  Union  Co.,  known  as  the  Careaga 
lease,  shall  be  renewed  or  a  new  lease  granted  to  the  Shell  Co.,  or  its  nominees,  which 
shall  be  acce])table  to  the  Consolidated  company.  The  legal  and  other  cost  of  nego- 
tiating and  preparing  such  lease  shall  not  be  borne  by  the  Consolidated  company. 

(b)  That  no  stops  shall  be  taken  to  modify  the  agreement  between  the  Western 
Union  €o.  ^nd  the  Associated  Oil  Co.  without  the  consent  of  the  Anglo-Saxon. 

Fourteenth.  The  Delaware  company  hereby  guarantees  that  the  Central  Petroleum 
Co.  has  no  liabi'ity,  express  or  implied,  direct  or  contingent,  except  as  stated  in 
schedule  A,  heroin  referred  to,  subject  to  such  changes  as  mav  have  taken  place  be- 
two'.n  May  31,  1921,  and  the  closing  date  as  a  result  of  transactions  in  the  reirular 
course  of  business;  but  it  is  expressly  understood  and  agreed  that  this  guarantee  only 
applies  to  liabilities  discovered  and  notified  to  the  Delaware  company  prior  to  July 

Fifteenth.  It  is  hereby  agreed  that  the  Delaware  companv  and  the  Anglo-Saxon 
will  respectively  be  liable  for  all  taxes  (if  any)  ultiniatelv  found  to  be  payable  by  any 
of  the  companies  whose  shares  or  assets  are  being  transferred  hereunder— other  than 
the  Union  Oil  Co.  of  California— in  respect  of  the  period  prior  to  May  31,  1921,  in 
excess  of  the  tax  liabilities  mentioned  in  schedules  A  and  B,  respectively,  and  simi- 
larly any  refunds  of  taxes  (if  any)  obtained  by  any  of  such  companies  shall  belong 
to  the  Delaware  company  or  the  Anglo-Saxon,  as  the  case  may  be. 


-•    -^Tfr  M*ii,-  ■'•".i.-. 


hn' 


%■ 


78 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


In  witness  whereof  the  parties  hereto  have  caused  these  presents  to  be  executed 
in  their  corporate  names  by  their  properly  authorized  officers  as  of  October  19,  1921. 

Henry  Lockhart,  Jr. 
Witnesses: 

Paul  Paine. 
Ernest  B.  Tracy. 

H.  Colijn. 
Witness: 

Adrian  Corbett. 


Exhibit  5. 

CIRCULARS,  union  OIL  CO.  (DELAWARE),  NOVEMBER  3,  1921. 

Notice  of  Special  Meetixq  op  Stockholders. 

Union  Oil  Co., 
New  York,  November  3,  1921. 

Notice  is  hereby  given  that  a  special  meeting  of  the  stockholders  of  Union  Oil  Co., 
a  Delaware  corporation,  has  been  called  to  be  held  at  the  office  of  said  company, 
No.  17  East  Forty-secoml  Street,  Borough  of  Manhattan,  New  York  City,  on  Thursday, 
November  17,  1921,  at  11  o'clock  in  the  forenoon,  for  the  purpose  of  considering  and 
acting  upon  the  following  matters: 

A.  The  ratification  of  a  certain  agreement  in  writing,  dated  October  19,  1921, 
between  said  Union  Oil  Co.  and  Ando-Saxon  Petroleum  Co.  (Ltd.),  which  agreement 
has  been  executed  on  behalf  of  said  Union  Oil  Co.  pursuant  to  authorization  by  its 
board  of  directors  and  subject  to  ratification  by  its  stockholders,  and  provides  in 
substance,  among  other  things,  that  said  Union  Oil  Co.  shall  organize  under  the  laws 
of  Delaware  a  corporation  (herein  called  the  new  company),  with  an  authorized 
capital  stock  of  10,000.000  shares  without  nominal  or  par  value;  that  the  new  company, 
directly  or  through  sul)sidiaries,  shall  acquire  all  said  Union  Oil  Co.'s  shares  of  stock 
in  Union  Oil  Co.  of  California,  all  of  the  property  and  assets  of  Columbia  Oil  pro- 
ducing Co.,  Western  Union  Oil  Co.,  Dunlop  Oil  Co.,  and  United  Western  Consolidated 
Oil  Co.,  certain  properties  of  National  Exploration  Co.,  Eddystone  Oil  Corporation, 
and  Commonwealth  Petroleum  Corporation,  and  all  said  Union  Oil  Co.'s  right,  title, 
and  interest  in,  to,  and  under  its  agreement  of  July  12,  1920,  with  the  Texas  Co. 
respecting  Central  Petroleum  Co.,  and  in  consideration  therefor  shall  issue  to  said 
Union  Oil  Co.  2,240,000  shares  of  its  said  stock,  pay  certain  cash,  and  assume  certain 
liabilities;  and  that  the  new  company  shall  acquire  all  or  substantially  all  of  the 
outstanding  stock  of  Shell  Co.  of  California  (after  the  withdrawal  of  certain  assets), 
Roxana  Petroleum  Corporation,  Ozark  Pipe  Line  Corporation,  and  Matador  Petroleum 
Co.,  and  in  consideration  therefor  shall  issue  to  said  Anglo-Saxon  Petroleum  Co. 
(Ltd.)  5,760,000  shares  of  said  capital  stock. 

B.  If  said  agreement  be  ratified,  the  granting  to  the  board  of  directors  of  said  Union 
Oil  Co.  of  authority  to  cause  said  company  and  its  subsidiaries  to  make  such  transfers 
and  do  such  other  acts  and  things  as  said, board  may  deem  to  be  necessary  or  advisable 
in  order  fully  to  carry  out  said  agreement,  and  to  take  such  further  steps  in  respect 
to  said  agreement  and  the  subject  matter  thereof  as  said  board  may  deem  to  be  neces- 
sary or  ad\'isal)le  for  the  proper  protection  of  the  interests  of  said  company;  and 

C.  The  transaction  of  such  further  business  as  may  properly  be  brought  before  said 
meeting. 

There  will  be  presented  and  read  at  said  meeting  a  copy  of  said  agreement  of  October 
19,  1921,  containing  a  more  detailed  statement  of  the  plan  herein  outlined  and  of  the 
steps  V.  hich  it  is  pro})osed  to  take  for  the  accomplishment  of  the  purposes  thereof. 

Inclosed  herewith  is  a  proxy  authorizing  the  persons  therein  named  or  any  of  them 
to  vote  at  said  meeting  in  favor  of  the  adoption  of  resolutions  ratifying  said  agreement 
and  granting  the  authority  herein  mentioned.  Each  stockholder  who  is  unable  to 
attend  said  meeting  and  is  in  favor  of  the  adoption  of  said  resolutions  is  urged  to  execute 
that  proxy  and  return  it  promptly  in  the  inclosed  stamped  envelope.  The  execution 
and  return  of  a  proxy  will  be  considered  as  authorizing  the  affixing  to  it  of  a  reve- 
nue stamp  required  by  law. 

New  York  City,  November  3,  1921. 

C.  E.  Forsdick.  Secretary. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


79 


New  York  City,  November  3,  1921. 
To  the  Stockholders  of  Union  Oil  Co.: 

In  connection  with  the  notice  of  special  meeting  of  stockholders  of  your  company, 
herewith  inclosed,  and  in  behalf  of  the  board  of  directors  of  your  company,  I  desire  to 
make  the  following  statements: 

An  opportunity  has  offered  of  consolidating  the  properties  owned  by  your  company 
with  the  properties  of  the  Shell  Co,  of  California,  Roxana  Petroleum  Corporation, 
Ozark  Pipe  Line  Corporation,  and  Matador  Petroleum  Co.,  the  first  three  of  which  are 
operating  in  the  same  fields  as  your  company,  and  all  of  which  collectively  own  pipe 
lines,  refineries,  and  other  facilities  which  will  supplement  the  properties  of  your 
company.  This  consolidation,  if  carried  out,  will  enable  your  company  without  the 
raising  of  new  capital  to  share  in  the  advantages  of  the  additional  refineries  and  other 
facilities  which  will  permit  the  immediate  realization  of  its  plans.  Negotiations  were 
entered  into  for  the  purpose  of  arriving  at  a  basis  for  such  consolidation,  and  as  a 
preliminary  step  a  careful  and  thorough  examination  and  valuation  of  the  physical 
properties  and  facilities  in  question  was  made  by  representatives  from  both  of  these 
groups  through  independent  accountants  and  engineers  and  an  approximate  valuation 
thereof  arrived  at.  After  also  taking  into  consideration  the  value  of  good  will  and 
operating  advantages  it  was  agreed  that  if  these  properties  were  vested  in  one  corpora- 
tion the  interest  of  your  company  therein  should  be  28  per  cent  and  that  of  the  other 
interests  72  per  cent. 

A  plan  was  thereupon  formulated  providing  for  the  organization  by  your  company 
of  a  Delaware  corporation,  which  will  be  hereinafter  referred  to  as  the  Consolidated  com- 
pany having  an  authorized  capital  stock  of  10,000,000  shares  of  no  par  value,  which  cor- 
poration, was  to  acquire  the  securities  and  properties  described  in  the  inclosed  notice, 
in  consideration  of  the  issue  to  your  company  of  2,240,000  shares  of  the  capital  stock  of 
the  Consolidated  company  and  the  payment  thereto  of  certain  sums  in  cash  hereinafter 
stated  and  the  issue  to  the  other  interests  of  5,760,000  shares  of  stock  and  the  assumption 
of  certain  liabilities  also  hereinafter  stated. 

Those  properties  of  the  Shell  Co.  of  California  and  the  Roxana  Petroleum  Corpora- 
tion and  of  your  company  omitted  from  this  plan  of  consolidation,  as  stated  in  said 
notice,  were  omitted  because  it  did  not  seem  advisable  from  the  operating  standpoint 
to  include  them. 

The  said  plan  provides  that  all  properties  to  be  consolidated  will  be  turned  into  the 
Consolidated  Co.  either  directly  or  through  the  acquisition  of  the  shares  of  the  capital 
stock  of  the  corporations  which  own  the  same,  as  they  existed  May  31,  1921,  subject 
to  transactions  in  the  general  course  of  business  from  that  date  to  the  date  of  closing, 
free  and  clear  of  all  current  liabilities  in  excess  of  those  which  can  be  cared  for  by 
current  assets,  excepting  that  the  Shell  Co.  of  California  and  the  Roxana  Petroleum 
Corporation  will  have  outstanding  a  surplus  indebtedness  of  $2,000,000,  and  there 
will  be  paid  to  your  company  the  sum  of  $777,777,  to  be  applied  on  account  of  its  bank 
loans,  and  the  sum  of  $386,000,  representing  the  excess  of  current  assets  over  current 
liabilities  of  the  subsidiary  companies  of  your  company's  group. 

As  stated  in  the  said  notice  the  plan  aforesaid  and  the  terms  upon  which  the  same 
is  to  be  carried  out  have  been  embodied  in  a  contract  dated  October  19,  1921,  which, 
pursuant  to  the  authorization  of  your  company's  board  of  directors,  has  been  executed 
with  Anglo-Saxon  Petroleum  Co.  (Ltd.),  the  representatives  of  the  owners  of  the 
stock  of  the  corporations  aforesaid,  subject  to  your  approval  and  the  approval  of  the 
stockholders  of  the  Anglo-Saxon  Petroleum  Co.  (Ltd.)*.  When  this  plan  has  been 
carried  out  the  Consolidated  Co.  will  hold,  in  addition  to  your  company's  holdings 
in  the  stock  of  the  Union  Oil  Co.  of  California  and  the  position  of  your  company  in 
the  Central  Petroleum  Co.,  the  stock  of  an  operating  company  in  the  California  field, 
the  stock  of  an  operating  company  in  the  midcontinent  field,  the  stock  of  a  pipe- 
line company  operating  in  the  midcontinent  field,  and  the  stock  of  an  exploration 
company  which  was  organized  for  the  purpose  of  doing  general  exploration  work. 
These  will  constitute  most  satisfactory  operating  units  for  the  fields  in  which  the 
Consolidated  Co.  will  be  interested. 

Both  your  company  and  the  Shell  Co.  of  California  have  recently  made  valuable 
discoveries  of  oil  properties  in  the  California  field,  principal  among  which  is  the  basin 
at  Signal  Hill,  discovered  by  the  Shell  Co.  of  California,  in  which  two  wells  have 
been  brought  in  with  a  large  initial  production  located  in  the  center  of  a  700-acre 
lease. 

^n  the  mid-continent  field  the  production  controlled  by  your  company  of  about 
8,000  barrels  is  in  large  part  accessible  to  the  Roxana  Petroleum  Corporation's  refinery 
through  the  Ozark  Pipe  Line  Corporation's  lines,  and  will,  in  addition  to  the  Roxana 
Petroleum  Corporation's  production  of  about  11,000  barrels,  be  adequate  in  itself  to 
run  the  Roxana  Petroleum  Corporation's  large  and  complete  refinery  at  Wood  River, 


•II 


80 


FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


81 


near  Ft.  Louie,  to  its  full  capacity  of  from  14,000  to  18,000  barrels  per  day.  The 
07Slt\  Fine  Line  Corporation's  lines  have  a  normal  capacity  of  24,000  barrels  and  are 
of  the  finest  construction,  extending  through  the  Gushing,  Hewitt,  and  Healdton 
fields  in  Oklahoma.  These  lines  run  about  as  follows:  A  10-inch  line  from  Wood 
Eivrr  to  Gushing,  a  distance  of  426  miles,  and  a  6-inch  line  from  Gushing  to  Waunka, 
a  distance  of  15G  miles,  with  smaller  gathering  lines  extending  to  Duncan  and  the 
Texas  territory.  The  refinery  at  Wood  River  has  exceptional  railroad  facilities  and 
the  ad-antage  of  a  low  freight  rate  to  one  of  the  richest  fields  of  consumption  of  oil 
products  in  the  United  States.  ^       ^^  •      i 

The  pipe  lines  referred  to  are  of  ample  size  and  are  equipped  with  sufficiently 
powerful  pumr>ing  stations  to  handle  oil  to  their  utmost  capacity,  and  the  Ozark  Pipe 
Line  Gorr>oration  has  every  facility  for  doing  a  large  transportation  business  in  addi- 
tion to  handling  its  own  oil  for  use  in  the  refinery  of  the  Roxana  Petroleum  Corpora- 
tion.  Bv  the  construction  of  additional  gathering  lines  from  the  trunk  line  the  busi- 
ness of  the  pipe  line  can  be  made  much  more  profitable,  the  refinery  fully  served, 
and  its  own  production  conserved  for  later  use.  Adequate  storage  facilities  also  exist 
both  in  California  and  in  the  mid-continent  fields.  Marketing  facilities  are  adequate 
at  the  Ft.  Louis  refinery,  as  is  also  the  case  in  California,  where  the  Shell  Co.  of  Cali- 
fornia has,  in  addition  to  its  jobbing  trade  in  California  and  the  Orient,  over  170 
retail  stations  for  the  sale  of  its  products.  Its  trade  in  gasoline  and  lubricating  oils 
in  that  district  is  particularly  profitable. 

In  a  Idition  to  the  properties  mentioned,  a  drilling  operation  is  in  progress  in  the 
Ftate  of  Wyoming,  where  the  Matador  Petroleum  Co.  owns  a  large  acreage,  the  opera- 
tions upon  which  have  not  proceed  el  far  enough  to  demonstrate  definitely  its  value. 

It  will  be  seen  from  this  brief  statement  of  conditions  that  any  equitable  arrange- 
n-ent  which  will  enable  your  company  to  take  advantage  of  the  facilities  of  these 
co-ppmies  should  enable  your  company  to  attain  its  full  height  of  development 
and  earning  capacity  much  sooner  than  by  endeavoring  to  attain  such  development 
by  its  own  unaided  and  natural  growth. 

'The  combining  of  these  facilities,  thus  permitting  your  company  to  reap  the  benefit 
and  profit  to  be  derived  from  the  exercise  of  the  complete  function  of  an  oil  com- 
pany, should  result  in  an  increased  earning  power,  and  in  the  attaining  by  your 
company,  ^ith  its  clean  and  exceptionally  valuable  assets,  of  a  growth  satisfactory 
alike  to  its  stockholders  and  officers. 

Your  company  after  the  proposed  consolidation  wdll  have  2,240,000  shares  (28  per 
cent  of  the  totalissue)  of  capital  stock  of  the  Consolidated  Co.,  two  10,000-ton  tankers, 
producing  properties  in  West  \  irginia  and  Kentucky,  and  liquid  assets  consisting 
of  cash,  ^■overnraent  bonds,  inventories  of  oil  and  materials,  accounts  and  notes 
receival>le,  of  an  approximate  value  of  $2,082,200,  against  which  its  current  liabili- 
ties including  bank  loans  and  final  payment  in  January,  1922,  on  Columbia  (hi 
Producing  Co.  stock,  are  $5,250,000;  in  addition  to  which  provision  is  to  be  made 
for  the  costs  and  expenses  involved  in  the  transfer  of  the  assets  to  the  Consolidated 
Co.  .ind  contingencies  for  Federal  taxes.  i  t.     •      v   r 

Your  board  of  directors  after  careful  consideration  of  all  the  facts  and  having  before 
it  the  recommendation  of  its  officers  and  representatives,  deems  the  arrangement 
for  apportionment  of  stock  to  represent  the  relative  values  of  the  properties  and  good 
will  contributed  bv  the  respective  interests  to  the  Consolidated  Co.  lo  l;e  eouitable 
and  fair  Your  board  of  directors  is  convinced  that  the  interests  of  the  stockholders 
of  vour  company  will  be  conserved  and  promoted  by  the  consolidation  suggested 
and  it  therefore  recommends  the  adoption  and  approval  of  the  contract  negotiated 
by  ^'our  company's  representatives  in  their  behalf,  which  contract  will  be  presented 
to  the  stockholders  in  extenso  on  the  occasion  of  their  meeting  on  November  17,  1921. 

C.  H.  ScHLACKS,  President. 


Exhibit  6. 


CIRCULAR  OF  LEE   HIGGINSON   &  CO.,  REGARDING  PREFERRED  STOCK 

OP  SHELL  UNION  OIL  CORPORATION. 

Proof  subject  to  change,  August  18,  1922.    $20,000,000  Shell  Union  Oil  Corporation  6 
per  .cent  cumulative  preferred  stock,  series  A.     Par  value,  $100. 

Dividends  payable  quarterly  be<j:inning  February  15,  May  15,  August  15,  and 
November  15,  callable,  at  compxnv's  option,  as  a  whole  or  in  part  for  the  sinking  fund, 
at  $110  per  share  and  accrued  dividends.  ,  xt    •       i  r.     i 

Free  of  existino-  Federal  normal  income  tax.  The  Mechanics  &  Metals  National  hank 
of  the  city  of  New  York,  transfer  agent;  Guaranty  Trust  Co.  of  New  York,  registrar. 


Capitalization.— Freierred  stock,   6  per  cent   cumulxtive,  ser.es  A   (this   issue) 
$20  000  000.     Common  stock  (authorized  10,000,000  shirev,  outstanding  8,000  000 
shares,  of  no  par  value,  representing  net  assets,  after  deducting  the  preferred  stock  of 

$181,912,822.  .  ,         ,  1.    X'       --    '   TT     i. 

Application  will  be  made  to  list  this  preferrei  stock  on  the  New  lor^  Exchange. 

The  company  has  no  bonded  indebtedness  nor  is  there  any  mortgage  on  any  of  its 
properties  or  on  the  properties  of  anv  of  its  sub3idiii\e3.  ■.     .    r    ,-u         ^ 

From  his  accompanying  letter,  William  II.  Allen,  Esq.,  president,  further  sum- 
marizes as  follow^s:  ,  ,         ,    ,,        1    -J-  _ 

Busines8.-The  Shell  Union  Oil  Corporition,  through  its  subsidiary  companies 
constitutes  a  consolidation  of  the  entire  Foval  Lutch-Shell  end  1^  n:on  Gil  Co.  of 
Delaware  interests  in  the  mid-conlinent  and  California  fields.  It  is  one  of  the  1  irgest 
operations  and  the  second  largest  compmv  in  production  in  the  oil  industrv  of  the 
L^nited  States.  Through  its  subsidiar/  con  p  nies  it  owns  and  operites  oil  properties 
in  the  California  and  mid-continent  fields,  hiving  a  total  net  prcduction  at  this  date 
in  excess  of  68,000  barrels  per  d.ay,  including  13,000  barrels  eetiled  production  ten  po- 
rarilv  shut  in.  Its  total  refining  capacity  is  ^8,000  barrels  per  dav  which  is  being  sub- 
stantially increased;  it  has  752  miles  of  p  pe  linei.  It  has  complete  facilities  on  the 
Pacific  coast  for  distribution  of  its  products  lo  the  uHimale  confiin  er. 

The  Shell  I'nion  Oil  Corporation  aleo  owns  16.17  per  cent  of  the  capital  stock  ol  tJae 
Union  Oil  Co.  of  California,  which  had  an  aA  era^e  production  during  1921  m  exceFS  of 
27  000  barrels  per  dav;  5  refineries,  with  a  total  daily  re  ning  capacity  of  more  than 
62,000 .barrels;  740  miles  of  pipe  lines,  and  extensive  distribution  systems  throughout 

the  Pacific  coast  territory.  .  .  .    , 

Priority  —No  mortgage— other  than  purchae-e  rronev  mortgages— or  loans  for  periods 
in  excess  of  one  year  or  stock  superior  to  the  preferred  slock  (eeries  A)  can  le  created 
without  consent  of  holders  of  75  per  cent  of  the  preferred  stock  (senes  A)  N either  tlie 
company  nor  any  of  its  subsidiaries  has  any  preeent  n  ortgsge  or  funded  dett. 

^i^^sx'^s  — Totalcombined  net  assets— after  deducting  all  liabilities  other  thsn  capital 
stock-conservatively  valued  at  over  §2(  1,912,8:^2,  are  equal  to  H/dO  per  share  of 
the  preferred  stock.  '  Net  current  assets  alone,  $23,'  81,7;,3,  e  iual  to  $115  per  share. 

Earninqs  —Net  profits  of  constituent  con  panics  and  properties,  for  the  four  years 
ended  December  31,  1921— after  deducting  1  ederal  taxes  and  depreciations,  depletion 
and  drilling  charges  averaging  $10,484,414  a  year-averaped  $6,188  020  or  more  than 
five  times  the  $1,200,000  annual  dividend  requirement  of  the  preferred  stock.  Net 
profits  for  the  year  ended  December  31, 1921 ,  were  $4,840,468,  or  more  than  four  times 
this  annual  requirement.  ^        ,    ,     .•        c      t?  ji      ^ 

Net  profits  for  the  six  months  ended  June  30,  1922— after  deductions  for  Federal 
taxes  and  $4,804,494  for  depreciation,  depletion,  and  dnllmg  charges -were  §4.740  9ol, 
nearly  eoual  to  the  net  profits  for  the  entire  year  1921,  and  at  the  rate  ot  more  than 
seven  and  three-fourths  times  the  present  preferred  stock  dividend  requirements 

Sinl'inqfund.—An  annual  cash  sinking  fund  for  the  b?neiit  of  preferred  stock, 
series  A,  first  payment  Mav  1,  1924,  equal  to  10  per  cent— but  not  in  any  year  more 
than  $800,00(>-^f  net  income,  after  payment  of  dividends  on  all  5-,eiies  of  preferred 
stock,  is  to  be  applied  solely  to  purchase  or  call  and  reUremjiit  of  preferred  stock 

Rounl  Dutch-Shell  group.— This  group,  w^hich  includes  the  Shell  Union  Oil  Corpora- 
tion is  of  world-wide  extent  and  importance.  This  constitutes  one  of  the  largest  and 
most  important  industrial  enterprises  in  the  ^vovld  and  has  proba  )ly  the  most  ex- 
tensive system  engaged  in  the  production,  rcnlniug.  tran.-^portatiou.  and  marketing  of 
petroleum  and  its  products  in  the  world -o-diy.  ,        ,      ,-      j 

The  indicated  present  valuation,  bas^^d  on  current  quota tioiis  for  listed  securities 
and  conservative  valuations  of  the  securities  not  listed,  of  \ji'i  toial  stock  capitaliza- 
tion of  the  Royal  Dutch  and  ^  hell  Transport  &  Trading  Co.'s  alone  is,  at  present 
exchange  rates',  in  excess  of  $1,000,000,000.  ^u     r  „      • 

The  rights  of  the  preferred  stoclvholders  (series  A)  are  described  on  the  following 
pages.     We  recommend  this  stock  for  investment.     Price  on  appb ration. 

All  legal  matters  relating  to  thi3  is=^ue  of  stock  have  been  passed  upon  by  Messrs 
Larkin,  Rathbone  &  Petty,  of  New  York,  for  us,  and  by  Forsyth  Wickes,  Lsq     of 
New  York,  for  the  company.     The  accounts  of  the  several  companies  have  been 
audited  bv  Messrs.  Price,  Waterhouso  Sz  Co.  or  Messrs.  Arthur  Y'oung  &  Co. 

The  statements  contained  in  this  circular,  while  not  guaranteed,  are  based  upon 
information  and  advice  which  we  believe  accurate  and  reliable. 


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82 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


Shell  Union  Oil  Corporation, 

New  York,  August  — ,  192S. 
Messrs.  Lee,  Higginson  &  Co. 

Dear  Sirs:  In  connection  with  the  iasue  of  $20,000,000  6  per  cent  cumulative 
preferred  stock,  series  A,  of  the  Shell  Union  Oil  Corporation,  I  submit  the  following 
information: 

Organization  and  buMness. — The  Shell  Union  Oil  Corporation  constitutes  a  consoli- 
dation of  substantially  the  entire  Royal  Dutch-Shell  and  Union  Oil  Co.  of  Delaware 
interests  in  the  mid-continent  and  California  fields,  was  incorporated  under  the 
laws  of  the  State  of  Delaware  February  8,  1922,  and  is  now  one  of  the  largest  oper- 
ations and  the  second  largest  company  in  production  in  the  oil  industry  of  the  LFnited 
States. 

The  combined  properties  show  a  net  production  in  excess  of  45,000  barrels  per 
day  in  the  California  field  and  23.000  barrels  per  day  in  the  mid-continent  field, 
paaking  a  total  net  production  at  this  date  in  excess  of  68,000  barrels  per  day,  includ- 
ing 13,000  barrels  settled  production  temporarily  shut  in.  The  refining  capacity  of 
33,000  barrels  per  day,  and  at  Wood  River,  111.  (East  St.  Louis),  of  15,000  barrels 
per  day,  give  the  company  a  total  daily  refining  capacity  of  48,000  barrels,  which  is 
being  substantially  increased.  There  are  in  California  170  miles  of  8-inch  pipe  line 
and  in  the  mid-continent  field  156  miles  of  6-inch  pipe  line  and  426  miles  of  10-inch 
pipe  line.  ^The  mid-continent  pipe-line  system,  totaling  582  miles,  extends  from 
the  refinery  at  Wood  River,  111.,  to  the  Gushing.  Hewitt,  and  Healdton  fields  in 
Oklahoma,  with  gathering  lines  extending  to  Duncan  and  the  Texas  territory.  It 
also  has  complete  facilities  on  the  Pacific  "coast  for  distribution  of  its  products  to  the 
ultimate  consumer. 

The  Shell  I'nion  Oil  Corporation,  in  addition,  owns  the  entire  outstanding  capital 
stock  of  the  following  corporations:  Shell  Co.  of  California,  Roxana  Petroleum  Cor- 
poration, Ozark  Pipe  Line  Corporation,  Matador  Petroleum  Co.,  and  in  addition  the 
interest  in  the  capital  stock  of  the  Union  Oil  Co.  of  California  mentioned  below  and 
an  option  to  purchase  two- thirds  of  the  common  stock  of  the  Central  Petroleum  Co., 
the  equity  and  earnings  applicable  to  which  two-thirds  interest  have  been  included 
in  the  following:  sta,tements  of  earnings  and  financial  condition. 

The  Shell  Union  Oil  Corporation,  in  addition  to  the  above,  owns  26.17  per  cent  of 
the  outstanding  capital  stock  of  the  Union  Oil  Co.  of  California.  That  company  had 
an  average  production  in  1921  in  excess  of  27,000  barrels  per  day;  owns  five  refineries, 
with  a  total  daily  refining  capacity  of  more  than  62,000  barrels:  425  miles  of  trunk 
pipe  lines  and  315  miles  of  gathering  lines;  also  has  its  own  tank  steamers,  tank  cars, 
and  extensive  distributing  and  marketing  systems. 

The  Royal  Dutch-Shell  group,  which  includes  the  Shell  Union  Oil  Corporation,  is 
of  world-wide  extent  and  importance.  The  group  constitutes  one  of  the  largest  and 
most  important  industrial  enterprises  in  the  world  and  has  probably  the  most  extensive 
system  engaged  in  the  production,  refining,  transportation,  and  marketing  of  petroleum 
and  its  products  in  the  world  to-day.  The  indicated  present  valuation,  based  on 
current  quotations  for  listed  securities  and  conservative  valuations  of  the  securities 
not  listed,  of  the  total  stock  capitalization  of  the  Royal  Dutch  and  Shell  Transport  & 
Trading  Cos.  alone  is,  at  present  exchange  rates,  in  excess  of  $1,000,000,000. 

Purpose  of  issue. — The  proceeds  of  this  issue  of  $20,000,000  of  preferred  stock  (series 
A)  will  provide  the  corporation  with  additional  working  capital  and  funds  for  con- 
struction and  development  work  and  the  acquisition  of  securities  and  proi^erties. 

Capitalization  [upon  completion  of  tkvi  financing). 

Preferred  stock,  6  per  cent  cumulative,  series  A  (this  issue) $20,  000,  000 

Common  stock  (authorized  10,000,000  shares),  outf'tanding  8,000,000 
shares,  of  no  par  value,  representing  net  assets,  after  deducting  the 
preferred  stoc-k  of 181, 912,  822 

The  Shell  Union  Oil  Corporation  has  no  bonded  indebtedness  nor  is  there  any 
mortgage  on  any  of  its  properties  or  on  the  properties  of  any  of  its  subsidiaries. 

Earnings. — The  following  is  a  statement  of  earnings  for  the  four  years  ending  Decem- 
ber 31,  1921,  whi( h  includes: 

(1)  For  the  years  1918  and  1919,  earnings  of  only  the  Royal  Dutch-Shell  properties. 

(2)  For  the  years  1920  and  1921,  earnings  of  the  Royal  Dutch-Shell  properties,  the 
combined  properties  of  the  Union  Oil  Co.  of  Delaware,  equity  in  earnings  of  the 
Central  Petroleum  Co..  and  dividends  from  the  Union  Oil  Co.  of  California 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


83 


Year  ended  Dec.  31. 


Profits  after 
Federal  taxes 

and  before 
depreciation, 

depletion, 

and  drilling 

charges. 


1918 1  $11,603,584 

1919 !  11,763,6.53 

1920 25,455,050 

1921 1  17,867,452 

Total  for  4  years j  66, 689, 739 

Average  per  year  for  4  years \  16, 672, 434 


Depreciation, 

depletion, 

and  drilling 

charges. 


$8,952,512 

7,815,538 

12,142,624 

13,026,984 


Net  profits. 


$2,651,072 
3,948,115 

13,312,426 
4,840,468 


41,937,658 
10,484,414 


24, 752, 081 
6, 188, 020 


The  foregoing  statement  shows  net  profits  for  the  four  years  ended  December  31, 
1921,  after  deducting  Federal  taxes  and  $41,937,658  for  depreciation,  depletion, 
and  drilling  charges,  averaged  $6,188,020,  or  more  than  five  times  the  $1,200,000 
annual  dividend  requirement  of  this  preferred  stock.  Net  profits  for  the  year  ended 
December  31,  1921,  were  $4,840,468,  or  more  than  four  times  the  annual  preferred 

dividend  requirement.  .         ,      -ni  j      i 

L^^Net  profits  for  the  six  months  ended  June  30,  1922,  after  deductions  for  lederal 
taxes  and  $4,804,494  for  depreciation,  depletion  and  drilling  charges,  were  $4,740,931, 
nearly  equal  to  the  net  profits  for  the  entire  year  1921,  and  at  the  rate  of  more  than 
fceven  and  three-fourths  times  present  preferred  stock  dividend  requirements. 

Financial  condition,  •' 

[Giving  effect  as  at  January  2,  1922.  to  the  consolidation  of  the  accounts  of  the  companies'  properties  and 
contractual  rights  acquired  by  the  Shell  Union  Oil  Corporation  on  February  8,  1922,  and  to  Uie  i^sue  ol 
8,000,000  shares  of  capital  stosk  of  no  par  value,  and  to  the  SheU  Union  Oil  Corporations  $20,000,000  6  per 
cent  cumulative  preferred  stock,  series  A,  this  issue.] 

ASSETS. 

Fixed  assets: 

Properties,  oil  lands,  leases,  pipe  lines,  refineries,  etc.  $198, 566, 540 

Less  reserves  for  depreciation  and  depletion 45, 446,  741 

^  ^  $153, 119, 799 

Investments,  including  stock  of  Union  Oil  Co.  of 

California. 33,838,407 

Current  assets : 

Cash - 18,665,431 

Accounts  and  notes  receivable 3,  299,  803 

Inventories 8, 208, 867 

30, 174, 101 

Prepaid  expense ^^8'  ^^^ 

Total 217, 470, 720 

LIABILITIES. 

Current  liabilitiet. 

Accounts  payable,  including — 

Federal  taxes 4, 774, 511 

Notes  payable 2,  317,  837  ^  „  ,„ 

^  ^  7,092,348 

Purchase  money  obligations  and  reserves  against  option  of  purchase .  8, 465, 550 

Preferred  stock,  6  per  cent  cumulative  (this  issue) 20, 000, 000 

Common  stock,  8,000,000  shares  of  no  par  value,  representing  net 

assets,  after  deducting  the  preferred  stock,  of 181, 912, 822 

Total.. 217,470,720 

The  foregoing  statement  shows  total  net  assets  of  $201,912,822  are  equal  to  $1,010  per 
share  of  the  preferred  stock.  Net  current  assets  alone  of  $23,081,753  are  equal  to  $1 15 
per  share.    The  valuation  of  the  properties  is  believed  to  be  conservative. 


51 
V 

I 


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84 


FOREIGN   OWNERSHIP   IN   THE  PETROLEUM   INDUSTRY. 


MANAGEMENT. 


Officers  and  directors  of  the  Shell  Union  Oil  Corporation  are : 

Officers:  William  H.  Allen,  president;  Adrian  rorbett,  vice  president;  James  II. 
Brookmire,  secretary  and  treasurer. 

Directors:  Richard  Airey,  president  Asiatic  Petroleum  Co.  (New  York)  (Ltd.); 
Frederic  W.  Allen,  of  Lee  lligginson  &  Co.;  William  II.  Allen,  president;  Avery  D. 
Andrews,  chairman  New  Orleans  Refining  Co.  (Inc.);  James  II.  Brookmire,  secretary 
and  treasurer;  Lewis  L.  Clarke,  president  3Vmerican  Exchange  National  Bank,  New 
York;  Adrian  Corbett,  vice  president;  Bayard  Dominick,  of  I)ominick  &  Dominick; 
Frederick  Godber,  president  Roxana  Petroleum  Corporation;  (  harles  Kayden,  of 
Hayden,  Stone  &  Co.;  Henry  Lockhart,  vice  president  Goodrich-Lockhart  Co.;  T.  W. 
Phillips,  jr.,  president  T.  W.  Phillips  Gas  &  Oil  Co.;  Samuel  F.  Pryor,  chairman 
executive  committee,  Remington  Arms  Co.  (Inc.);  Charles  H.  Sabin,  chairman 
guaranty  Trust  Co.  of  New  York;  John  C.  Van  Eck,  president  Shell  Co.  of  California; 
Samuel  M.  Vauclain,  president  Baldwin  Locomotive  Works;  E.  P.  Whitcomb,  presi- 
dent Union  Natural  (las  Co.,  Pittsburgh;  William  W.  Woods,  vice  president  National 
City  Bank,  New  York. 

PREFERRED    STOCK    PROVISIONS. 

Among  the  preferences  and  limitations  which  apply  to  the  preferred  stock  (series  A) 
are  the  following,  in  brief: 

Series  A,  $20,000,000  6  per  cent  cumulative,  par  $100;  dividends  payable  quarterly 
February,  May,  August,  and  November  15. 

Restrictions  on  additional  issues. — Additional  issues  of  preferred  stock  may  be  made, 
but  only  provided  (1)  accrued  dividends  and  sinking  fund  on  the  preferred  stock, 
including  all  series,  shall  haA  e  been  paid;  (2)  total  net  assets  after  deducting  all  lia- 
bilities and  all  reserves,  including  depletion,  drilling,  and  depreciation  reserves,  shall 
be  at  least  five  times  the  total  amount  of  preferred  stock  of  all  series  then  to  be  out- 
standing, including  the  additional  preferred  stock  then  proposed  to  be  issued;  and  (3) 
the  average  annual  net  earnings  applicable  to  preferred  dividends  covering  a  period 
of  three  years  ending  within  three  months  immediately  preceding  the  date  of  issue 
shall  have  been  at  least  three  times  the  dividend  reauirements  on  all  series  of  preferred 
stock,  including  dividends  on  the  preferred  stock  tnen  proposed  to  be  issued. 

Preferred,  in  the  event  of  involuntary  dissolution  or  liquidation,  as  to  assets  up  to 
par  and  as  to  its  specific  dividends  over  any  other  class  of  stock  other  than  all  series 
of  preferred  stock  at  the  time  outstanding.  In  event  of  voluntary  dissolution  or 
liquidation,  preferred  stock  (series  A)  entitled  to  $110  per  share  and  accumulated 
dividends  before  any  dislril-ulion  is  made  on  any  class  of  stock  other  than  all  series 
of  preferred  stock  at  the  tinio  outstanding. 

Series  A  to  be  callable,  at  company's  option,  at  $110  per  share  and  accumulated 
dividends  on  any  dividend  date  on  30  days'  notice,  either  as  a  whole  or  in  part,  for 
the  sinking  fund  in  any  amounts  representing  whole  shares. 

Priority. — No  mortgage  or  loans  for  ])eriods  in  excess  of  ofie  year  or  stock  havin,-. 
prioritv  ovev  the  preferred  stock,  may  bo  created  by  tlie  com]>any  without  the  consen  t 
of  the  holders  of  75  ])er  ce^it  of  the  ])referred  stock,  including  all  series  except  that 
the  company  may  acquire  additional  property  subject  to  existing  or  purchase  money 
mortgages  or  liens  and  renew  the  same. 

Sinking  fund. — An  annual  cash  sinking  fund  for  tlie  benefit  of  preferred  stock 
(series  A),  first  payment  May  1,  1924,  equal  to  10  per  cent  (but  not  in  any  year  more 
than  $800,000)  of  net  income  after  payment  of  di^idends  on  all  series  of  preferre-J 
stock,  is  to  be  applied  solely  to  i)urchase  or  call  and  retiren  ent  of  preferred  ttock 
(series  A). 

Series  A  to  ha\e  no  voting  power,  unless  four  consecutive  quarterly  dividends  an 
due  and  unpaid,  or  unless  the  company  is  in  default  in  the  oliserxancc  of  any  of  the 
preferred  stock  provisions,  or  unless  the  company  has  been  declared  bankrupt,  or  a 
receiver  of  its  property  has  been  appointed.  If  any  of  the  above  events  shall  occur, 
the  preferred  stockholders  shall,  during  its  continuance,  be  entitled  to  elect  one-hall 
of  the  board  of  directors,  and  in  addition  to  cast  one  vote  for  each  share  of  preft^rred 
stock  upon  all  other  matters  on  whit  h  stockholders  may  a  ote. 

No  cash  dividends  shall  be  ])aid  on  stock  other  than  preferred  stock  (eeries  A), 
except  out  of  net  profits  earned  after  May  15,  1922. 

Series  A  to  have  no  subsc  ription  rights.  The  holders  of  series  A  preferred  stock 
shall  have  no  rights  to  8ub8cril)e  for  any  issue  of  capital  stock  of  the  company^cmmon 
or  preferred— or  for  any  issue  of  securities  that  may  be  converted  into  capital  stock, 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


85 


The  provisions  in  the  certificate  of  incorporation  effecting  such  preferred  stock. 

eeries  A,  may  not  be  altered  or  changed  except  with  the  affirmative  vote  of  75  per 

cent  in  interest  of  such  preferred  stock  in  addition  to  the  affirmative  vote  of  a  majority 

in  interest  of  the  common  stock. 

Very  truly  yours,  ^     . , 

William  H.  Allen,  President. 


Exhibit  7. 


CIRCULARS,  SEPTEMBER  26,    1922,   REGARDING  DISSOLUTION  OF  THE 

UNION  OIL  CO.  (DELAWARE). 

Notice  of  Special  Meeting  of  Stockholders. 

Union  Oil  Co., 
New  York,  September  26,  1922. 

Notice  is  hereby  given  that  a  special  meeting  of  the  stockholders  of  Union  Oil  Co., 
a  Delaware  corporation,  has  been  called  to  be  held  at  the  office  of  said  company.  No.  7 
West  Tenth  Street,  in  the  city  of  Wilmington,  County  of  New  Castle,  State  of  Delaware, 
Buch  office  being  located  in  the  offices  of  the  Corporation  Trust  Co.  of  America,  at  said 
address,  on  October  20,  1922,  at  2  o'clock  p.  m.,  to  consider  and  take  action  upon  the 
following  resolution  duly  adopted  by  the  board  of  directors  of  said  company  at  a  meet- 
ing thereof  duly  called  and  held  on  September  25,  1922: 

''Resolved,  That  in  the  judgment  of  the  board  of  directors  of  Union  Oil  Co.,  a 
Ddaware  corporation,  it  is  adxisable  and  most  for  the  benefit  of  said  company  that  it 
should  be  dissolved  and  that  its  assets,  after  its  debts  have  been  paid  or  provided  for, 
should  be  distributed  among  its  stockholders," 

and  for  the  transaction  of  such  other  business  as  may  properly  come  before  the  meeting. 

W.  C.  Stagg,  Secretary. 


Union  Oil  Co., 
New  York,  September  26,  1922. 
To  the  stockholders  of  Union  Oil  Co.: 

In  accordance  with  the  plan  heretofore  announced,  the  board  of  directors  of  this 
company  has  called  a  special  meeting  of  the  stockholders  of  this  company  to  be  held 
October  20,  1922,  to  consider  and  act  upon  a  proposal  to  dissolve  this  company  and  to 
distribute  its  assets  after  its  debts  have  been  paid  or  provided  for. 

The  139,000  shares  of  the  common  stock  of  Shell  Union  Oil  Corporation  recently  offered 
to  the  stockholder^  of  this  company  were  oversubscribed  by  such  stockholders,  and 
the  proceeds  were  used  to  pay  off  this  company's  bank  loans.  The  remaining  liabili- 
ties of  this  company  it  is  conservatively  estimated  can  be  liquidated  with  the  proceeds 
of  the  sale  of  the  two  10,000-ton  tankers,  and  other  miscellaneous  assets,  leaving 
2,085,000  shares  of  common  stock  of  Shell  Union  Oil  Corporation  for  distribution  to 
the  stockholders  of  this  company,  which  would  be  at  the  rate  of  1^  shares  of  common 
stock  of  Shell  Union  Oil  Corporation  for  each  share  of  stock  of  this  company. 

As  a  condition  precedent  to  any  such  distribution,  however,  it  is  necessary  that 
the  consent  of  two-thirds  in  interest  of  the  stockholders  of  this  company  having  voting 
power  shall  be  obtained  to  a  dissolution  of  this  company  at  the  special  meeting  of 
such  stockholders  to  be  held  as  aforesaid. 

Inclosed  herewith  is  a  formal  notice  of  such  meeting  and  a  proxy  to  be  used  thereat. 

If  properly  executed  proxies  from  two-thirds  in  interest  of  the  stockholders  of  this 
company  are  not  received  by  the  date  of  said  meeting,  an  adjournment  of  such  meeting 
will  have  to  be  taken,  which  would  postpone  the  date  of  the  distribution  proposed. 

All  the  stockholders  of  this  company  are  urgently  requested  upon  receipt  of  the 
inclosed  proxy  to  immediately  execute  it  and  return  it  in  the  inclosed  envelope  to 
•  W.  C.  Stagg,  secretary  of  this  company. 

Union  Oil  Co., 
By  James  H.  Brookmire,  President. 


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86 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM   INDUJ>TRY. 


Exhibit  8. 


CIRCULAR,  OCTOBER  17,  1921,  TO  THE   STOCKHOLDERS  OF  UNION  OIL 

CO.  OF  CALIFORNIA. 


Fo  Union  Oil  Stockholders: 


Los  Angeles,  Calif.,  October  17, 1921. 


The  large  number  of  stockholders  who  were  present  at  the  last  annual  meeting  will 
instantly  recognize  the  inclosed  proposed  agreement  as  a  crystallization  of  the  senti- 
ment so  freely  expressed  at  that  time  and  as  a  protective  measure  which  subsequent 
developments  would  seem  to  emphasize  as  expedient  and  timely.  At  that  meeting 
the  settled  determination  to  maintain  (California's  control  of  this  great  property  and  to 
resent  and  defeat  any  effort  to  take  that  control  and  management  away  from  California 
was  unmistakable. 

Your  company  is  one  of  the  great  institutions  of  California.  It  was  created  and 
developed  by  Californians.  Its  properties  are  largely  in  California.  A  large  majority 
of  its  shares  are  owned  in  California.  A  very  great  majority  of  its  stockholders  live  in 
California.  They  work  in  cooperation  with  each  other  and  take  a  just  pride  in  the 
development  of  your  company  and  in  its  vast  resources.  They  have  a  common 
interest  which  they  desire  to  protect  for  their  common  benefit.  It  is  perfectly  natural 
that  there  should  be  resentment  at  the  thought  that  California  and  Californiars  might 
lose  their  great  enterprise;  that  its  control  and  management  might  be  taken  by  parties 
foreign  to  California  and  entirely  unknown  to  us;  that  these  unknown  parties  might 
have  nothing  in  common  with  Californians  and  that  the  fine  cooperative  California 
spirit  might  be  destroyed. 

We  believe  that  Union  Oil  Co.  of  California  should  remain  Californian.  We  have 
proper  pride  in  its  development.  We  believe  it  belongs  here.  We  believe  the  true 
spirit  of  cooperative  actio'a  is  embodied  in  the  holding  company  plan  and  that  it  is 
now  essential  for  our  mutuaj  protection . 

The  purpose  and  intent  in  the  establishment  of  this  holding  company  is  to  enable  a 
very  laire:e  number  of  stockholders  to  unite  their  interests  so  that  they  may  act  as  a 
unit.  This  does  not  mean  that  any  one  man  will  guide  the  destinies  of  the  holding 
company.     There  is  no  dominating  influence  to  come  into  this  holding  company. 

A  very  large  portion  of  the  Union  Oil  of  California  stock  is  held  as  a  permanent 
investment,  but  there  are  some  who  may  wish  to  sell  or  trade  in  the  new  stock,  or  use 
it  as  collateral.  Embodied  in  our  efforts  will  be  the  listing  of  the  holding  company's 
shares  on  the  same  exchanges  where  the  present  stock  is  listed  to  give  it  the  market 
status  it  will  deserve  and  be  entitled  to  and  to  make  it  ecjually  good  collateral  as 
the  present  stock. 

A  preliminary  canvass  of  a  few  stockholders  has  been  made  to  more  definitely, 
determine  the  sentiment  and  learn  what  we  may  expect  from  this  general  circulariza- 
tion  of  stockholders.     This  canvass  has  shown  that  the  movement  is  strongly  favored. 

You  have  doubtless  been  informed  of  the  fact  that  about  27  per  cent  of  the  stock 
of  Union  Oil  Co.  of  California  has  been  acquired  and  is  now  held  in  one  single  corporate 
ownership  foreign  to  California.  One  important  factor  in  the  present  situation  is  the 
fact  that  no  one  knows  from  day  to  day  who  may  turn  up  as  the  owner  of  this  large 
concentrated  block  of  stock.  We  do  not  know  where  he  or  they  may  live  or  what 
their  purpose  may  be.  Such  a  condition  is  intolerable.  No  management  can  properly 
function  under  such  circumstances.  It  is  demoralizing  to  the  loyal  army  of  einployees 
as  well  as  to  the  managing  officers  to  be  constantly  watching  the  news  items  for  informa- 
tion and  listening  to  disturbing  rumors.  Why  should  we  Californians.  owners  col- 
lectively of  a  majority  interest,  really  remain  in  the  minority? 

We  believe  we  can  count  upon  your  sympathetic  cooperation,  whether  you  live  iu 
California  or  elsewhere.  We  believe  you  will  recognize  the  justice  of  our  purpose. 
If  upwon  examination  of  the  inclosed  agreement  you  are  in  sympathy  with  the  move- 
ment, we  earnestly  ask  that  you  promptly  evidence  that  fact  by  returning,  properly 
signed,  the  copy  of  the  agreement  sent  you  and  that  you  join  in  the  good  work  by 
canvassing  your  friends  and  seeing  that  they  also  help  the  cause. 

It  is  time  for  Californians  to  become  the  leaders.  Let  us  clear  the  atmosphere  and 
occupy  our  rightful  position.  .  .  .       ^ 

In  the  event  you  desire  to  join  in  this  effort  you  should  sign  the  inclosed  without 
delay  and  return  it  to  any  of  the  undersigned  or  to  the  temporary  office  of  the  holding 
company,  1134  Pacific  Mutual  Building,  Sixth  and  Grand  Streets,  I.<08  Angeles,  Calif.: 

1.  Avery,  Dr.  M.  N.,  Guaranty  Trust  &  Savings.  Los  Angeles,  Calif. 

2.  Blinn,  E.  B.,  Central  Building,  Pasadena,  Calif. 

3.  Cravens,  John  S.,  Sixth  and  Spring  Streets,  Los  Angeles,  Calif. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


87 


4.  Cochran,  George  I.,  Pacific  Mutual  Life  Insurance  Co.,  Sixth  and  Grand,  Los 
Angeles,  Calif. 

5.  Clark.  E.  W.,  Union  Oil  Building,  Los  Angeles.  Calif. 

6.  Condit,  Fillmore,  1847  East  Ocean,  Long  Beach,  Calif. 

7.  Earl.  Guy  C,  14  Sansome  Street,  San  Francisco,  Calif. 

8.  Graves,  J.  A.,  Farmers  &  Merchants  Bank,  Fourth  and  Main,  Los  Angeles,  Calif. 

9.  Johnson,  A.  P.,  356  South  Broadway,  Los  Angeles,  Calif. 

10.  Milbank.  Isaac.  1134  Pacific  Mutual  Building,  Los  Angeles,  Calif. 

11.  Morshead,  SUnley  W..  Mills  Building.  San  Francisco,  Calif. 

12.  Newton,  I.  B.,  365  Loma  Drive,  Los  Angeles.  Calif. 
"~    Orcutt.  W.  W.,  Union  Oil  Building.  Seventh  and  Spring.  Los  Angeles,  Calif. 

Robinson,  Henry  M.,  First  National  Bank,  Seventh  and  Spring,  Los  Angeles, 


13 
14. 
Calif. 
15. 
16. 
17. 
18. 
19 


Stewart  Lyman,  632  Lucas  Street,  Los  Angeles.  Calif. 

Stewart  W.  L..  Union  Oil  Building.  Los  Angeles,  Calif. 

Staats,  W.  R.,  640  South  Spring  Street,  Los  Angeles,  Calif. 

St.  Clair,  L.  P.,  Union  Oil  Building.  Los  Angeles,  Calif. 
^^.  Warren.  J.  G..  323  Lafayette  Place,  Los  Angeles,  Calif. 

20.  Whiting.  Dwight,  California  Building,  Second  and  Broadway,  Los  Angeles, 
Calif. 


Articles  of  Incorporation  of  Union  Oil  Associates. 

Know  all  men  by  these  presents:  That  we,  the  undersigned,  a  majority  of  whom  are 
citizens  and  residents  of  the  State  of  California,  have  this  day  voluntarily  associated 
ourselves  together  for  the  purpose  of  forming  a  corporation  under  the  laws  of  the 
State  of  California,  and  we  hereby  certify: 

I.    THAT  the   name   OF   SAID   CORPORATION   SHALL   BE   AND  IS   UNION    OIL   ASSOCIATES. 

II.  That  the  purposes  for  which  said  corporation  is  formed  are:  To  buy  and  other- 
wise acquire,  and  become  the  owner  of,  shares  of  the  capital  stock  of  Union  Oil  Co.  of 
California,  a  corporation  duly  organized  and  existing  under  the  laws  of  the  State  of 
California,  and  to  issue  in  payment  therefor  fully  paid  shares  of  the  capital  stock  of 
this  corporation  equal  in  par  value  to  the  shares  of  the  capital  stock  of  Union  Oil  Co. 
of  California  so  acquired. 

To  buy  or  otherwise  acquire  from  Union  Oil  Co.  of  California  shares  of  its  capital 
stock,  and  for  the  purpose  of  financing  such  purchases  to  offer  and  sell  shares  of  the 
unissued  capital  stock  of  this  corporation  to  the  stockholders  thereof  in  proportion  to 
their  respective  stockholdings — stock  so  offered  but  not  purchased  by  stockholders 
may  be  sold  to  any  purchasers — at  such  times,  for  such  prices,  and  upon  such  terms 
as  the  board  of  directors  of  this  corporation  shall  determine. 

To  sell  or  issue  shares  of  its  capital  stock  to  any  purchasers — without  previous 
offering  to  its  stockholders — pro\ided  this  corporation  receives  therefor  shares  of  the 
capital  stock  of  Union  Oil  Co.  of  California  at  least  equal  in  aggregate  par  value  to  the 
aggregate  par  value  of  shares  of  the  capital  stock  of  this  corporation  so  sold  or  issued. 

To  have,  exercise,  enjoy,  and  avail  itself  of  all  rights,  powers,  and  privileges  of 
ownership  of  shares  of  the  capital  stock  of  Union  Oil  Co.  of  California,  including  the 
right  in  all  ways  to  represent  and  vote  thereon  upon  attorneys  in  fact  or  proxies; 
including  also  full  power  to  exercise  any  and  all  rights  and  privileges  and  to  avail 
itself  of  all  benefits  at  any  time  offered  to  or  conferred  upon,  or  made  available  to, 
stockholders  of  said  Union  Oil  Co.  of  California. 

It  shall  have  full  power  to  divide  or  distribute  among  its  stockholders — pro  rata  in 
proportion  to  their  respective  stockholdings — earnings,  increment  or  increase,  and/or 
surplus — whether  money,  funds,  securities  or  assets — and/or  unissued  shares  of  its 
capital  stock. 

To  set  aside  from  its  income  sufficient  funds  to  meet  and  pay  all  of  the  necessary 
operating  and  other  expenditures  of  this  corporation. 

To  do  all  acts  and  things  incident  to  or  relating  to  or  convenient  in  connection  with 
carrying  out  any  or  all  of  its  business  and  purposes  as  aforesaid:  Provided,  however ^ 
That  no  sale  or  other  disposal — saving  only  on  final  dissolution  of  the  corporation- 
can  at  any  time  be  made  of  the  shares  of  the  capital  stock  of  Union  Oil  Co.  of  California 
owned  by  this  corporation  except  en  bloc,  and  no  sale  or  disposal  shall  be  made, 
except  upon  written  assent  of  the  holders  of — or  vote  representing — at  least  two- 
thirds  of  the  issued  stock  of  this  corporation. 


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FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


III.  That  the  place  where  the  principal  business  of  this  corporation  is  to  be  trans- 
acted shall  be  and  is  Los  Angeles,  Los  Angeles  County,  State  of  California. 

IV.  That  the  t«rm  for  which  said  corporation  is  to  exist  shall  be  50  years  from  and 
after  the  date  of  its  incorporation. 

V.  That  the  number  of  directors  or  trustees  of  said  corporation  shall  be  20,  and  that 
the  names  and  residences  of  the  directors  or  trustees  who  are  appointed  for  the  first 
year,  and  to  serve  until  the  election  and  qualitication  of  their  respective  successors, 
are  as  follows,  to  wit: 


M,  N.  Avery,  Los  Angeles,  Calif. 
Frank  C.  Bolt,  Pasadena,  Calif. 
George  1.  Cochran,  Los  Angeles,  Calif. 
E.  W.  Clark,  Los  Angeles,  Calif. 
Fillmore  Condit,  Long  Beach,  Calif. 
Shannon  Crandall,  Los  Angeles,  Calif. 
J.  A.  Graves,  Los  Angeles,  Calif. 
A.  P.  Johnson,  Los  Angeles,  Calif. 
J.  S.  Mardonnell,  Pasadena,  Calif. 
Isaac  Milbank,  Los  Angeles,  Calif. 
Stanley    W.    Morshead,    San    Francisco, 
Calif. 

VI.  That  the  amount  of  the  capitil  stock  of  said  corporation  is  $30,000,000,  which 
shall  be  evidenced  by  and  divided  into  300,000  shires,  of  the  par  value  of  $100  each. 

VII.  That  the  amount  of  said  capital  stock  which  has  been  actually  subscribed  is 
$2  000,  and  the  following  are  the  names  of  the  persons  by  whom  the  same  has  been 
subscribed,  to  wit: 


I.  B.  Newton,  Los  Angeles,  Calif. 
W.  W.  Orcutt,  Los  Angeles,  Calif. 
Henry  M.  Robinson,  Pasadena,  Calif. 
Lyman  Stewart,  Los  Angeles,  Calif. 
W.  L.  Stewart,  Los  Angeles  County,  Calif. 
William  k.  Staats,  Pasadena,  Calif. 
L.  P.  St.  Clair,  Los  Angeles,  Calif. 
Dwight  Whiting,  Los  Angeles,  Calif. 
J.  C.  Warren,  Los  Angeles,  Calif. 


Name. 


M.  N.  Avery 

Frank C.  Bolt.... 
George  I.Cochran 

E.W.Clark 

Fillmore  Condit . . 
Shannon  Crandall 

J.  A.  Graves 

A.  P.  Johnson 

J.  S.  Macdonnell.. 
Isaac  Milbank 


Number 
oi  shares. 

Amount. 

$100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

Name. 


Stanley  W.  Morshead 

I.  B.  Newton 

W.  W.  Orcutt 

Henry  M.  Robinson. 

Lyman  Stewart 

W.  L.  Stewart 

William  R.  Staats... 

L.  P.  St.  Clair 

Dwight  Whiting 

J.  G.  Warren 


Number 
of  shares. 


Amount. 


SlOO 
100 
100 
100 
100 
100 
100 
100 
100 
100 


In  witness  whereof  each  of  the  persons  named  in  said  articles  of  incorporation  ae 
directors  thereof  has  hereunto  affixed  his  signature  as  of  this  25th  day  of  March,  1922. 
Isaac  Milbank,  M.N.  Avery,  Frank  C.  Bolt,  E.  W.  Clark,  George  I.  Cochran, 
Fillmore  Condit,  Shannon  Crandall,  J.  A.  Graves,  A.  P.  Johnson, 
J.  S.  Macdonnell,  Stanley  W.  Morshead,  I.  B.  Newton,  W.  W.  Orcutt, 
Henry  M.  Robinson,  Lyman  Stewart,  W.  L.  Stewart,  William  R. 
Staats,  L.  P.  St.  Clair,  Dwight  Whiting,  J.  G.  Warren. 

State  of  California, 

County  of  Los  Angeles^  ss: 

On  this  27th  day  of  March,  1922,  before  me,  Ruth  Higgins,  a  notary  public  in  and 
for  said  county  and  State,  residing  therein  and  duly  commissioned  and  sworn,  per- 
sonally appeared  M.  N.  Avery,  Frank  C.  Bolt,  George  I.  Cochran,  E.  W.  Clark,  Fill- 
more Condit,  Shannon  Crandall,  J.  A.  Graves,  A.  P.  Johnson,  J.  S.  Macdonnell,  Isaac 

Milbank, ,  LB.  Newton,  W.  W.  Orcutt,  Henry  M.  Robinson,  Lyman  Stewart, 

W.  L.  Stewart,  William  R.  Staats,  L.  P.  St.  Clair,  Dwight  Whiting,  and  J.  G.  Warren, 
personally  known  to  me  to  be  the  persons  described  in,  and  who  executed,  the  fore- 
going articles  of  incorporation  of  Union  Oil  Associates,  and  they  acknowledged  to 
me  that  they  each  executed  the  same.  «.  •  , 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  affixed  my  official  seal  the 
day  and  year  in  this  certificate  first  above  written. 

[notarial  seal.]  Ruth  Higgins, 

Notary  Public  in  and  for  said  County  of  Los  Angeles,  State  of  Califomxa. 


\ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


89 


State  of  California, 

City  and  County  of  San  Francisco,  ss: 

On  this  28th  day  of  March,  1922,  before  me,  Flora  Hall,  a  notary  public  in  and  for 
said  city  and  county  and  State,  residing  therein  and  duly  commissioned  and  sworn, 
personally  appeared  Stanley  W.  Morshead,  personally  known  to  me  to  be  the  person 
whose  name  is  subscribed  to  the  within  instrument,  and  acknowledged  to  me  that 
he  executed  the  same. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  official  seal  in  said  city  and 
county  the  day  and  year  in  this  certificate  first  above  written. 

[notarial  seal.]  Flora  Hall, 

Notary  Public  in  and  for  said  City  and  County  of  San  Francisco, 

State  of  California. 


No.  98387. 


Indorsed:  Filed  in  the  office  of  the  secretary  of  state  of  the  State  of  California 
March  28,  1922. 

Frank  C.  Jordan,  Secretary  of  State. 
By  Robert  V.  Jordan,  Deputy. 


Exhibit  9. 

CURTIS  BILL. 

•  [S.  3334,  Sixty-sixth  Congress,  first  session.] 

A  BILL  To  encourage  reciprocity  in  trade  relations. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United  States  of  America 
in  Congress  assembled,  That  no  citizen  or  subject  of  any  country  which  requires  by  law, 
regulation,  or  otherwise  any  stipulation  in  any  contract,  lease,  sale,  or  other  agreement, 
relating  to  mines  or  minerals,  including  petroleum,  in  the  said  country  or  its  possessions 
or  dependencies,  which  prevents  or  prohibits  American  citizens,  because  of  their 
nationality,  from  being  shareholders,  or  which  limits  the  number  of  shares  which  may 
be  held  by  American  citizens  in  such  undertakings,  or  which,  because  of  nationality, 
places  restrictions  on  American  citizens  holding  any  position  in  the  company  or  on 
the  board  of  directors  or  similar  control  body  shall  be  permitted  to  hold  either  directly 
or  indirectly  any  ri^ht,  title,  or  interest,  in  any  mine  or  mineral  deposit,  including 
petroleum  in  the  United  States  or  any  of  its  dependencies,  or  to  act  on  the  board  or  in 
any  managerial  capacity  whatsoever  in  connection  with  any  company  having  any 
right,  title,  or  interest  whatsoever  in  mines  or  minerals  in  the  United  States  or  its 
dependencies,  so  long  as  the  restrictions  before  mentioned  shall  remain  in  force  in  any 
law  or  regulation  or  in  any  contract,  lease,  or  other  agreement  to  which  the  Government 
of  the  foreign  country  or  any  of  its  officials  or  representatives  is  a  party. 

Sec  2.  That  no  alien  company  which  by  its  articles  of  incorporation  or  association, 
statutes,  by-laws,  or  in  any  other  similar  manner  prohibits  American  citizens,  because 
of  their  nationality,  from'  being  shareholders,  or  which  limits  the  number  of  shares 
which  may  be  held  by  American  citizens,  or  prohibits  American  citizens  from  holding 
any  position  on  the  boiard  of  directors  or  in  the  company  shall  be  permitted  to  hold, 
either  directly  or  indirectly,  any  right,  title,  or  interest  in  any  mine  or  mineral  de- 
posit, including  petroleum,  in  any  part  of  the  United  States  or  its  dependencies. 

Sec  3.  That  if  any  of  the  things  prohibited  in  the  preceding  sections  exist  at  any 
time  beginning  two  years  after  the  passage  of  this  act,  then,  and  in  that  event,  the  posi- 
tions so  held  by  aliens  shall  become  vacant  and  any  and  all  acts  performed  by  any 
such  alien  connected  with  such  company  shall  be  without  legal  force  or  effect,  and  the 
shares  or  interests  so  held  contrary  to  this  law  shall  be  sold  by  the  Attorney  General 
to  American  citizens  under  such  conditions  and  regulations  as  the  Attorney  General 
shall  fix,  but  always  within  one  year  from  the  time  such  shares  or  interests  come  under 
the  provisions  of  this  act,  and  the  net  proceeds  of  such  sales  in  each  case  shall  be  paid 
to  the  alien  citizen,  subject,  or  corporation  concerned. 


35904—23- 


-8 


\*'f*wC^-4 


\  ^  . 


■^   1 


mi,.. 


90 


FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


Exhibit  10. 


PHELAN  BILL. 

(S.  4390),  Sixty-sixth  Congress,  second  session.] 
A  BILL  Authorizing  the  incorporation  of  the  United  States  Oil  Corporation. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United  States  of  America 
in  Congress  assembled,  That  a  corporation  to  be  known  as  the  United  States  Oil 
Corporation  is  hereby  authorized  to  be  incorporated  under  the  laws  of  the^  District  of 
Columbia,  or  any  State  or  Territory,  for  the  purpose  of  developing  the  oil  resources 
of  foreign  countries. 

The  corporation  shall  be  controlled  by  a  board  of  nine  directors,  to  be  appointed 
by  the  President  of  the  United  States. 

The  board  of  directors  shall  be  appointed  with  due  regard  for  their  fitness  and 
efficiency  necessary  for  the  discharge  of  the  duties  imposed  upon  them  and  to  a  fair 
representation  of  the  geographical  divisions  of  the  United  States. 

Vacancies  on  the  board  of  directors  shall  be  filled  by  election  by  a  majority  vote  of 
the  board. 

A  vacancy  in  the  board  of  directors  shall  not  impair  the  right  of  the  remaining 
members  of  the  board  to  exercise  all  powers  thereof. 

The  board  shall  have  power  to  adopt  by-laws  and  regulations  governing  ita  pro- 
cedure. 

The  board  of  directors  shall  elect  a  president  and  shall  fix  the  compensation  of  its 
officers,  experts,  and  other  employees,  as  may  be  found  necessary. 

The  corporation  may  explore,  develop,  refine,  transport,  and  store  petroleum  and 
its  products,  or  whatever  it  produces,  subject  to  a  preferential  right  on  the  part  of 
the  United  States  Government  to  take  all  of  ita  supply,  or  a  portion  thereof,  at  any 
time,  upon  payment  of  the  market  price. 

The  corporation,  if  in  its  judgment  such  action  be  necessary  to  carry  out  the  pur- 
poses for  which  it  was  incorporated,  may  form  subsidiary  corporations  under  the  laws 
of  the  District  of  Columbia  or  any  State  or  Territory. 

The  corporation  may  solicit  subscriptions  of  stock,  and  the  total  capital  stock  shall 
be  determined  by  the  board  of  directors. 

The  majority  oi  the  stock  of  the  corporation  must  be  owned  by  citizens  of  the  United 
States,  but  nothing  in  this  act  shall  be  construed  to  prevent  foreign  citizens  from  be- 
coming minority  stockholders. 

The  corporation  shall  not  enter  into  any  combination,  agreement,  or  understanding, 
express  or  implied,  with  any  other  corporation,  partnership,  association,  or  person, 
which  will  cause  an  unlawful  restraint  of  trade,  nor  make  any  unfair,  unjust,  or  dis- 
criminatory contract  against  the  United  States,  or  any  citizen  thereof,  in  the  procure- 
ment of  petroleum,  or  its  products,  for  the  use  of  the  United  States. 

No  liability  shall  be  incurred  by  the  corporation  which  will  in  any  manner  bind  or 
involve  the  United  States. 

The  Government  of  the  United  States  reserves  the  privilege  of  demanding  reports 
from  time  to  time  of  the  activities  of  the  corjwration. 


Exhibit  U. 


REPORT  OF  AMERICAN  PETROLEUM  INSTITUTE  AND  AGREEMENT 
BETWEEN  GREEK  GOVERNMENT  AND  D'ARCY  EXPLORATION  CO. 
(LTD.). 

Report  from  the  Foreign  Relations  Committee  Of  the  American  Petroleum 
Institute  in  Response  to  Request  of  the  Federal  Trade  Commission  op 
August  1,  1922. 

The  following  is  the  information  requested : 

'  'The  Federal  Trade  Commission  is  making  an  inquiry  into  certain  aspects  of  the 
petroleum  trade,  in  compliance  with  United  States  Senate  Resolution  311,  copy  of 
which  is  attached. 

"You  are  requested  to  furnish  promptly  the  following  information: 

"Do  foreign  governments  controlling  petroleum-oil-producing  territories  to  your 
knowledge  discriminate  against  American  citizens  or  companies,  seeking  to  develop 
such  resources,  in  the  following  particulars: 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


91 


( (i 


I  (a)  With  respect  to  the  acquisition  or  exploitation  of  petroleum  oil  lands? 
"(6)  With  respect  to  the  ownership  of  shares  in  corporations  which  are  organized 
to  acquire  or  exploit  petroleum-oil  lands  or  otherwise  to  engage  in  the  petroleum 
industry?"  ^ 

The  report  of  the  committee  is  discussed  in  detail  under  the  following  headings: 

1.  Foreign  governments  which  are  actively  taking  a  direct  interest  in  acquiring 
petroleum  resources  in  various  parts  of  the  world. 

2.  Parts  of  the  world  where  foreign  governments  hold  concessions  or  are  making 
explorations  and  developing  petroleum  resources. 

3.  Parts  of  the  world  where  foreign  nationals  hold  concessions  or  are  making  explora- 
tions for  petroleum  and  the  extent  to  which  Government  aid  is  given  for  these  nationals 
by  their  respective  Governments. 

4.  Extent  to  which  foreign  governments  are  trying  to  control  the  petroleum  situation. 

5.  Exclusion  of  aliens  by  foreign  governments  from  owning  and  operating  oil  fields 
in  their  doniains,  colonies,  or  mandated  territories. 

6.  Subsidies  granted  by  foreign  governments. 

7.  Commercial  or  legal  restrictions  which  are  made  to  protect  foreign  corporations 
in  their  operations  which  are  detrimental  to  American  oil  companies. 

8.  Abstracts  from  reports  of  May  17, 1920,  May  16, 1921,  and  June  13,  1921,  from  the 
Secretary  of  State  in  response  to  Senate  resolution  of  March  10,  1920.  in  regard  to 
restrictions  imposed  by  foreign  countries  upon  citizens  of  the  United  States  in  pros- 
pecting for  or  acquiring  lands  containing  petroleum  within  the  territory  under  the 
jurisdiction  and  influence  of  such  countries. 

(1)  foreign    governments  which  are  actively  taking  a  direct  interest  in 

ACQUIRING    petroleum    RESOURCES    IN    VARIOUS    PARTS    OF    THE     WORLD. 

Great  Britain,  France,  Russia,  Argentine  Republic,  Rumania,  Egypt,  Poland. 

(2)    PARTS    OF    THE    WORLD    WHERE     FOREIGN     GOVERNMENTS    HOLD    CONCESSIONS    OR 
ARE    MAKING    EXPLOTATIONS    AND    DEVELOPING    PETROLEUM    RESOURCES. 

Great  Britain.— In  England  and  Scotland  during  1919  where  exploratory  drilling 
was  progressing. 

Persia.— The  Anglo-Persian  Oil  Co.  (Ltd.)  claims  through  its  subsidiary,  the 
North  Persia  Oil  Co.  (Ltd.),  title  to  three  and  one-half  of  the  five  northern  Prov- 
inces through  purchase  of  the  concession  granted  to  a  party  by  the  name  of  Kosh- 
taria,  which  concession  the  Persian  Government  have  claimed  is  invalid.  The  Per- 
sian Government  is  offering  a  concession  on  the  entire  five  northern  Provinces  exclu- 
sively to  American  interests  in  connection  with  a  substantial  loan  to  be  made  to 
Persia  by  American  bankers. 

Australia  (Papua).— Through  an  advance  of  50,000  pounds  to  the  Commonwealth 
of  Australia  to  assist  in  the  testing  of  the  Papuan  oil  fields. 

Mesopotntni/i. —The  Turkish  Petroleum  Co.  (Ltd.),  a  British  corporation,  the  stock 
of  which  18  owned  50  per  cent  by  the  Anglo-Persian  Oil  Co.  (Ltd.),  25  per  cent  by  the 
Prench  Government,  and  25  per  cent  by  the  Royal  Dutch-Shell  combination,  claims 
title  to  all  of  the  oil  rights  in  Mesopotamia,  first,  through  what  is  known  as  the  Turkish 
Petroleum  Co.  (Ltd.)  concession,  and,  second,  through  the  petroleum  rights  acquired 
under  what  is  known  as  the  Bagdad  and  Anatolian  Rail wav  grants.  The  Secretary  of 
State  of  the  United  States  has  taken  the  position  that  the  Turkish  Petroleum  Co. 
(Ltd.)  concession  is  invalid  and  has  made  representations  to  the  British  Government 
to  tins  effect.  The  latest  information  is  that  negotiations  are  in  progress  for  a  partici- 
pation by  an  American  group  and  a  settlement  to  the  satisfaction  of  the  State  Depart- 
ment of  the  question  of  the  open-door  policy  in  Mesopotamia. 

Macedonia.— The  Bureau  of  Foreign  and  Domestic  Commerce  has  received  a  con- 
firmation of  a  report  that  the  Greek  Government  has  granted  to  the  Anglo-Pereian 
Oil  (^.  an  exclusive  concession  for  all  petroleum  rights  in  eastern  and  western 
Macedonia  for  an  exploration  period  of  5  years,  with  an  option  for  a  50-year  exploitation 
concession  in  certain  districts.  For  the  exact  terms  of  this  concession  see  Exhibit 
A  attached  hereto.  ' 

SAN    REMO    AGREEMENT. 

This  agreement  has  been  confirmed  by  the  British  and  French  Governments  and 
gives  to  the  nationals  of  these  two  countries  facilities  for  the  acquisition  of  oil  con- 
cessions in  British  andJrench  colonies,  protectorates,  and  zones  of  influence,  including 
Algeria,  Tunis,  and  Morocco.  Groups  so  formed  must  contain  a  majority  of  British 
interests. 


ii 


-w 


^^^^^mmmm 


«T«TO^"-^^fe»#i 


/         1 


f^i- 


4 


92 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


TRIPARTITE    AGREEMENT. 


Si*?ned  at  Sevres,  August  10,  1920,  and  defines  the  sphere  of  influence  of  France 
in  Silicia  and  the  western  part  of  Kurdistan  bordering  on  Syria,  and  of  Italy  in  south-  - 
ern  Anatolia.  The  British  spheres  of  influence  are  not  only  undefined  but  are  not 
referred  to.  This  raises  the  q^uestion  as  to  whether  the  agreement  is  susceptible  of 
the  interpretation  that  the  British  interests  may  be  held  to  extend  to  any  or  all  the 
remaining  parts  of  the  British  Empire.  The  agreement,  in  effect,  renders  diplomatic 
support  to  each  of  the  signatories  in  maintaining  their  respective  positions  in  the 
areas  in  which  their  special  interests  are  recognized. 

ROYAL    DUTCH-SHELL. 

It  is  understood  that  the  Anglo-Persian  Oil  Co.  (Ltd.)  has  renewed  its  marketing 
agreement  with  the  Royal  Dutch-Shell  up  to  the  end  of  1925. 

France.— The  San  Remo  agreement,  referred  to  on  page  91,  herewith.  French 
groups  so  formed  under  this  agreement  must  contain  at  least  67  per  cent  French  in- 
terests. .    . 

The  tripartite  agreement.  (See  tripartite  agreement  between  Great  Britain, 
France,  and  Italv  on  p.  92,  herewith.) 

Russia.--The  present  policy  of  the  Russian  Government  is  one  of  nationalization 
of  its  petroleum  resources.  Oil  production  has  been  reduced  from  38  per  cent  of  the 
world 's  pre-war  production  to  about  9  per  cent  post-war  production.  The  Government 
has  taken  control  of  the  oil  fields  without  rej^ard  to  ownership  and  without  compensa- 
tion to  owners, with  the  result  that  no  American  interests  would  be  safe  in  their  nego- 
tiations with  the  Russian  Government. 

Japan.— In  Japan,  Formosa,  China,  and  the  island  of  Sakhalin  by  withdrawing  oil 
fields  within  their  domain  from  private  ownership  or  development.  (See  p.  95, 
Japan.) 

Argentine  Republic— DirecHy  engaged  in  producing  and  refining  in  the  Comodoro 
Rivadavia  oil  fields.  Argentina  at  present  has  no  law  governing  petroleum  exploita- 
tion but  is  operating  under  an  antiquated  mining  lav/. 

Rumania.— The  nationalization  of  the  petroleum  industry  in  all  its  branches  has  fre- 
quently been  agitated  in  Rumania,  but  no  definite  legislation  has  ever  been  enacted  to 
make  this  effective.  In  a  decree  of  November  27,  1918,  large  areas  of  land  were  ex- 
propriated from  native  and  foreign  landowners  alike  and  resold  by  the  Government 
to  peasants,  the  Government  reserving  the  subsoil  rights.  The  Government  owns  a 
large  area,  some  of  which  is  petroliferous.  Portions  of  these  lands  have  been  leased 
from  time  to  time  and  these  concessions  are  now  operated  partly  by  foreign  and  partly 
by  national  capital.  However,  since  1909  only  two  small  leases  have  been  granted  by 
the  Government,  both  to  local  companies,  without  competitive  bidding. 

The  Government  has  fixed  the  prices  of  petroleum  products  for  internal  consumption 
since  the  beginning  of  the  war.  It  has  exercised  this  control  also  over  the  principal 
necessaries  of  life  in  Rumania. 

Egypt.— In  August,  1919,  the  Eg>^ptian  Government  decided  to  undertake  deep 
boring  operations,  with  a  definite  view  to  intensive  production  if  petroleum  were 
discovered  in  any  ap]^reciable  quantities.  This  was  a  radical  departure  from  the  former 
policy  of  the  (lovernment  in  segregating  selected  areas  for  intensive  drilling  by  the 

Government. 

Icelnnd.—The  government  of  Iceland  recently  established  a  petroleum  monopoly 
and  has  concluded  an  agreement  with  the  British  Petroleum  Co.  (Ltd.),  a  subsidiary 
of  the  Anglo-Persian  Oil,  for  its  entire  supplies  for  a  period  of  three  years,  Previous 
to  the  creation  of  this  government  monopoly  the  United  States  was  supplying  at  least 
75  per  cent  of  the  Iceland  requirements. 

Poland.  This  Government  is  interested  in  the  oil  business  and  it  owns  the  State 
refinery  located  at  Drohobycz,  which  has  a  daily  crude  capacity  equivalent  to  6,000 
barrels  of  42  gallons.  It  is  understood  that  the  Government  is  also  operating  some 
producing  properties  for  its  own  account  In  the  Boryslaw  field.  In  addition,  it  ob- 
tains a  supply  of  crude  for  its  refinery  through  the  20  per  cent  which  it  collects  from 
private  operators  on  State  lands.  . 

During  the  war  the  Government  exercised  a  rigid  control  over  the  industry,  con- 
trolling both  the  prices  for  home  consumption  and  export.  It  has  recently  relin- 
quished control  of  export  prices  in  the  home  trade.  The  Government  still  controls  a 
considerabl  j  area  of  State  lands  in  some  of  the  oil  fields  that  have  not  been  yet  opened 
for  exploitation. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


93 


(3)  PARTS  OF  THE  WORLD  WHERE  FOREIGN  NATIONALS  HOLD  CONCESSIONS  OR  ARE 
MAKING  EXPLORATIONS  FOR  PETROLEUM  AND  THE  EXTENT  TO  WHICH  GOVERNMENT 
AID  IS  GIVEN   FOR  THESE   NATIONALS   BY  THEIR   RESPECTIVE   GOVERNMENTS. 

Great  Britain. — There  are  companies  in  27  countries,  including  the  United  States, 
which  have  close  relations  with  the  Anglo-Persian  Oil  Co.  (Ltd.)  and  the  Royal 
Dutch-Shell  combine  through  interlocking  directorates,  marketing  arrangements, 
and  financial  interests. 

Australia. — Australian  mining  law  provides  that  petroleum  on  or  belo\y  the  surface 
of  all  land  in  Queensland,  whether  alienated  in  fee  simple  or  not  so  alienated  from 
the  Crown,  and  if  so  alienated  whensoever  alienated  is  and  always  has  been  the  prop- 
erty of  the  Crown;  further,  that  in  every  lease  for  mining  for  petroleum  a  royalty  at 
the  rate  of  12  pounds  10  shillings  per  cent  of  the  gross  value  of  all  petroleum  obtained 
during  the  term  of  the  lease  is  charged. 

The  labor  covenant  is  also  interesting  in  that  it  stipulates: 

(a)  The  lessee  must  employ  continuously  during  the  whole  term  of  his  lease  not 
less  than  one  man  for  every  8  actes  leased  by  him. 

(6)  He  must  erect  a  boring  plant  within  six  months  of  the  beginning  of  the  lease. 

(c)  He  must  not  approve  any  buildings,  machinery,  or  plant  (except  after  obtain- 
ing permission  from  the  minister  of  mines). 

Oil-boring  operations  in  Papua  (New  Guinea)  are  jointly  financed  by  the  Anglo- 
Persian  Oil  Co.  (Ltd.)— British  Government  owned— and  the  Goverment  of  Australia, 
and  provision  was  made  in  1920  for  the  establishment  of  a  refinery  to  be  owned  and 
controlled  jointly  by  the  Australian  Government  and  the  Anglo-Persian  Oil  Co. 
(Ltd.),  with  measures  to  insure  full  success  and  development  of  this  refinery  through 
imposition  of  customs  duties. 

On  July  14, 1922,  in  the  Australian  House  of  Representatives,  a  question  was  asked 
and  answered  which  clearly  indicates  that  the  Australian  Government  intends  to 
adhere  to  its  exclusive  policy  of  developing  any  oil  fields  in  the  mandated  terri- 
tory of  New  Guinea.    The  question  and  answer  are  as  follows,  as  taken  from  Hansard  : 

"Senator  Lynch  asked  the  minister  representing  the  prime  minister  upon  notice — 

"  •  Whether  the  Government  has  considered  the  advisability  of  off ering  a  reward  in 
a  similar  or  modified  form  to  that  applying  in  the  Commonwealth  for  the  discovery 
of  mineral  oil  and  petroleum  in  the  island  possessions  in  the  Pacific  under  Common- 
wealth control.' 

"Senator  E.  M.  Millen  (in  reply): 

"  *  The  Government  reserves  the  right  of  searching  for  mineral  oils,  and  therefore  it 
is  not  proposed  to  offer  any  reward  to  private  prospectors.'  " 

Trinw/a^f.— Trinidad  is  a  British  Crown  colony,  and  there  are  restrictions  on  the 
licensing  and  leasing  of  oil  rights  in  Trinidad  which  belong  to  the  Crown  and  which 
are  not  covered  by  valid  existing  licenses  or  leases. 

Clauses  in  existing  licenses  and  leases  prohibit,  under  penalty  of  forfeiture,  foreign 
control  or  management  of  the  companies  which  hold  sucn  licenses  or  leases. 

Netherlands  and  colonies. — Through  its  nationals  in  the  United  States,  Central  and 
South  America,  Dutch  East  Indies,  and  Curacoa. 

Prospecting  license  concessions  are  granted  only  to  Dutch  subjects,  inhabitants  of 
the  Netherlands  or  Netherlands  East  Indies,  and  to  companies  incorporated  under 
Dutch  laws  either  in  the  Netherlands  or  Netherlands  East  Indies  having  in  their 
board  of  directors  a  majority  of  Dutch  subjects.  The  minister  for  the  colonies,  on 
behalf  of  the  Netherlands  East  Indies,  is  authorized  for  and  on  behalf  of  the  Nether- 
ands  Indies  and  with  the  person  or  persons  to  be  nominated  by  him  in  a  registered 
corporation  to  be  known  as  Netherlands  Indies  Mineral  Oil  Co.,  for  the  development 
of  the  Djambi  concessions  in  central  Sumatra,  and  the  persons  to  be  nominated  by 
the  minister  for  the  colonies  are  the  Bataafsche  Petroleum  Co.  and  the  Shell  Transport 
&  Trading  Co.  Dutch  companies  in  which  there  was  a  preponderant  American  stock 
ownership  have  been  unable  to  acquire  concessions  except  a  few  of  relatively  minor 
importance.  Further,  it  is  a  matter  of  record  that  a  number  of  years  ago  when 
effort  was  made  by  an  American  corporation  to  purchase  the  controlling  stock  in- 
terest in  an  important  Dutch  producing  and  operating  company  that  the  Dutch 
Government  intervened  and  prevented  the  transfer,  and  that  this  local  coinpany 
later  on  was  taken  over  by  the  Royal  Dutch,  thus  assisting  in  completing  their  mo- 
nopoly of  the  producing  business  in  the  Dutch  Indies. 

Japan. — Through  its  nationals  in  Japan,  Formosa,  China,  and  the  island  of  Sakhalin. 
(See  p.  95,  Japan.) 

France. — Through  its  nationals  in  the  United  States,  Morocco,  Greece,  and  Galicia. 

Argentine  Republic. — Through  its  nationals  in  Argentina. 

Rumania. — Through  its  nationals  in  Rumania.. 


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FOR?:iGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


95 


(4)  EXTENT  TO   WHICH  FOREIGN  GOVERNMENTS   ARE  TRYING  TO  CONTROL  THE  PETRO- 

LEUM  SITUATION. 

Great  Britain. — 1,  By  creating  a  permanent  governmental  petroleum  department, 
with  powers  and  duties  as  follows: 

(a)  Act  as  adviser  in  petroleum  matters  to  all  branches  of  His  Majesty's  Gov- 
ernment. 

(6)  Grant  concessions  for  all  oil  developed  within  the  British  Empire. 

(c)  To  advise  and  assist  British  oil  companies  in  procuring  concessions  and  carry- 
ing on  work  and  conducting  trade  in  other  countries. 

2.  By  debarring  foreign  nationals  from  owning  or  operating  oil-producing  proper- 
ties in  the  British  Isles. 

Prospecting  for  petroleum  or  working  petroleum  properties  is  lawful  in  the  United 
Kingdom  only  for  the  Board  of  Trade,  minister  of  munitions,  or  person  or  persons 
authorized  by  them. 

3.  By  direct  participation,  ownership,  and  control  of  petroleum  companies. 
France. — Dunng  1921  a  bill  was  prepared  by  the  general  commissioner  on  motor 

spirits  and  petroleum  for  presentation  to  the  French  Parliament  for  governmental 
control  over  the  petroleum  industry  and  instituting  customs  regulations  with  a  view 
to  development  of  refining  in  P>ance. 

The  war-time  control  in  France  over  the  petroleum  industry  is  still  in  existence 
in  a  modified  form,  and  the  French  Government  are  still  maintaining  a  petroleum 
office  in  charge  of  the  director  of  essences  at  Petrol es.  This  official  also  exercises  a 
control  over  the  local  selling  prices  in  the  French  market,  which  prices  are  subject 
to  his  approval. 

Representations  were  made  through  the  State  Department  to  the  French  Govern- 
ment bv  the  American  Petroleum  Institute  in  1921  regarding  the  tariff  preferentials 
discriminating  against  American  companies. 

The  ownership  of  coal,  and  presumably  of  oil  resources,  is  vested  in  the  Govern- 
ment and  concessions  for  exploitation  are  granted  on  a  royalty  basis.  The  terms  of 
individual  concessions  may  be  made  such  as  exclude  foreign  control. 

Rvjisia. — See  page  92,  herewith. 

Japan. — See  page  95,  herewith. 

Netherlands  and  colonies. — See  page  93,  herewith. 

Argentine  Republic. — Have  withdrawn  oil  fields  within  their  domain  from  private 
ownership. 

Rumania. — See  page  93,  herewith. 

Italy. — See  tri])artite  agreement  between  Great  Britain,  France,  and  Italy  on 
page  92,  herewith. 

Mexico. — The  conditions  imposed  by  articles  27  and  33  of  the  Mexican  constitution 
promulgated  February  5,  1917,  are  well  known  to  Government  officials  and  oil  men 
interested  in  Mexico.  It  is  impossible  at  this  time  to  define  the  position  of  the  holders 
of  oil  lands  by  natives  or  foreigners  in  Mexico. 

(5)  EXCLUSION  OP  ALIENS  BY  FOREIGN  GOVERNMENTS  FROM  OWNING  AND  OPERATING 

OIL   FIELDS   IN   T^EIR   DOMAINS,    COLONIES,    OR   MANDATED   TERRITORIES. 

See  sections  1,  2,  3,  and  4  for  details. 

(6)    SUBSIDIES    GRANTED    BY    FOREIGN    GOVERNMENTS. 

Great  Britain. — British  oil  companies  are  assisted  by  protection  and  restrictions 
and  policies  discussed  in  the  preceding  sections. 
Australia. — See  page  91,  herewith. 

(7)  COMMERCIAL  OR  LEGAL  RESTRICTIONS  WHICH  ARE  MADE  TO  PROTECT  FOREIGN 
CORPORATIONS  IN  THEIR  OPERATIONS  WHICH  ARE  DETRIMENTAL  TO  AMERICAN  OIL 
COMPANIES. 

Royal  Dutch-Shell.— This  group  is  constantly  extending  its  operations  in  unified 
control  by  purchasing  competing  companies  outright  or  by  taking  them  into  the 
combine.  Such  purchai^es  and  interlocking  control  are  prohibited  by  the  antitrust 
laws  of  the  United  States.  It  is  reliably  stated  that  the  purchasing  of  the  Mexican 
Eagle  Oil  Co.  (Ltd.)  (Lord  Cowdray's  Mexican  properties)  was  refused  by  the  British 
Government  to  an  American  company  and  afterwards  sold  to  the  Dutch-Shjjll,  thus 
adding  to  its  large  holdings  and  giving  possession  to  potential  production  in  Mexico 


as  well  as  to  pipe  lines,  storage  wharves,  sea  loading  facilities,  and  refineries.  Through 
this  purchase  the  Dutch-Shell  procured  control  of  the  following  subsidiaries  of  the 
Mexican  Eagle: 

Eagle  Oil  &  Transport  Co.  (Ltd.),  which  owns  and  operates  a  large  fleet  of  tank 
steamers. 

Anglo  Mexican  Petroleum  Co.  (Ltd.),  a  marketing  or^nization  that  has  extensive 
markets  in  Mexico,  Central  and  South  America,  the  British  Isles,  and  markets  some 
oil  in  the  United  States. 

Anglo-Persian  Oil  Co.  (Ltd.). — In  addition  to  its  connections  with  the  Burma  Oil 
Co.  (Ltd.) — being  practically  owned  by  the  latter  company  and  British  Government — 
the  Anglo-Persian  Oil  Co.  (Ltd.)  has  acquired  and  now  entirely  controls  the  British 
Tanker  Co.  (Ltd.),  Petroleum  Steamship  Co.  (Ltd.),  Home  Light  Oil  Co.  (Ltd.),  and 
the  British  Petroleum  Co.  (Ltd.).  The  three  last-named  companies  were  formerly 
German  controlled  and  taken  over  by  the  British  Government  shortly  after  the  war. 
The  Burma  Oil  Co.  (Ltd.)  enjoys  a  monopoly  granted  by  the  Crown  of  Burma.  The 
Anglo-Persian  Oil  Co.  (Ltd.)  has  a  concession  of  unprecedented  magnitude  granted 
by  the  Persian  Government. 

The  development  of  a  strong  nationalistic  sentiment  among  British  oil  companies  is 
illustrated  by  a  resolution  adopted  by  the  Lobitos  Oil  Fields  (Ltd.)  to  prevent  the 
transfer  of  more  than  20  per  cent  capital  to  foreigners. 

British  preferential  tariffs  in  some  of  the  British  West  Indies  and  colonies  in  the 
Caribbean  littoral  are  prescribed . 

These  high  tariffs  on  American  petroleum  products  are  a  serious  handicap  to  our 
nationals  in  their  competition  for  trade  in  these  markets. 

France. — See  page  94  under  France. 

(8)    RESTRICTIONS    ON    AMERICAN    OIL    PROSPECTORS    IN    FOREIGN    COUNTRIES. 

Abstracts  from  reports  of  May  17,  1920,  May  16,  1921,  and  June  13,  1921,  from  the 
Secretary  of  State  in  response  to  Senate  resolution  of  March  10,  1920,  in  regard  to 
restrictions  imposed  by  foreign  countries  upon  citizens  of  the  LTnited  States  in  pros- 
pecting for  or  acquiring  lancls  containing  petroleum  within  the  territory  under  the 
jurisdiction  and  influence  of  such  countries. 

Finland. — Does  not  allow  foreigners  to  own  rights. 

France. — Not  abstracted;  described  on  pages  preceding. 

British  Empire. — Not  abstracted;  described  on  pages  preceding. 

Australia. — "A  foreign  company  shall  not  directly  or  indirectly  be  capable  of 
acquiring  and  holding  a  mineral  oil  lease  or  any  interest  therein  whether  legal  or 
equitable."     (Australian  mineral  ordinance,  1913.) 

British  West  African  Colonies. — In  Nigeria  mineral  oil  is  prospected  for  and  mined  by 
British  subjects  or  companies.  In  the  Gold  Coast  and  Nigeria  the  government  has  a 
right  of  preemption  over  mineral  oil  mined,  based  upon  valuation  f.  o.  b.  Port  Arthur, 
Tex. 

Canada. — Identical  reciprocity  provision  regarding  aliens  to  United  States  Federal 
Statutes,  that  portion  section  1,  Public  No.  146,  Sixty-sixth  Congress,  February  28, 
1920.  .     . 

India. — Only  British  subjects  or  companies  controlled  by  British  subjects  can  pro- 
cure a  prospecting  license  or  a  mining  lease. 

Newfoundland. — ^Anglo- Persian  Oil  Co.  has  exclusive  right  to  prospect  oil  in  im- 
granted  Crown  lands  during  the  next  five  years.     (Infotmation,  Jan.  4,  1921). 

Trinidad. — Regulations  applying  Crown  lands  provide  that  not  more  than  25  per 
cent  of  the  capital  of  the  company  shall  be  owned  by  aliens  and  the  chairman  and 
managing  director  and  a  majority  of  the  other  directors  shall  at  all  times  be  British 

subjects. 

Dutch  East  Indies  or  Netherlands  East  Indies. — ^The  Royal  Dutch-Shell  has  a  com- 
plete economic  monopoly  of  production.  (See  exchange  of  notes  between  the  United 
States  Government  and  the  Government  of  the  Netherlands,  S.  Doc.  11,  67th  Cong.) 
For  additional  data  see  page  93,  herewith. 

Albania. — In  July,  1921,  it  was  reported  that  oil  concessions  were  to  be  granted  by 
the  Albanian  Government  to  a  British  company,  su  bsidiary  di  the  Anglo-Persian  Oil 
Co.  (Ltd.),  51  per  cent  of  the  stock  to  be  held  by  the  said  company  and  49  per  cent  by 
the  Government  and  people  of  Albania.  It  is  not  known  whether  this  concession  was 
granted. 

France. — Not  abstracted;  described  on  pages  preceding. 

Japan. — ^The  Japanese  mining  law  provides  that  no  person  other  than  subjects  of 
the  Empire  or  juridical  persons  duly  formed  in  accordance  with  the  laws  thereof  are 
entitled  to  acquire  mining  rights.    Juridical  persons  established  in  Japan  under 


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96 


FOREIGN   OWNERSHIP   IN   THE  PETROLEUM   INDUSTRY. 


Japanese  law,  even  though  some  or  all  of  its  constituents  are  aliens,  are  in  the  eyes 
of  the  Jajlanese  law  Japanese  nationals. 

Guatemala. — ^The  nation  holds  absolute  title  to  all  sources  of  petroleum  in  the 
Republic.  Leases  are  not  to  exceed  10  years  in  duration  and  are  made  only  with 
native  or  naturalized  citizens.  Contracts  are  nontransferrable  unless  approved  by 
the  Government,  and  then  only  provided  the  interested  parties  are  citizens. 

Mexico. — Not  abstracted;  descried  on  page  94  herewith. 

Palestine. — -The  British  policy  in  this  section  has  until  recently  restricted  petro- 
leum activities.  It  is  reported  that  an  American  oil  company  has  of  recent  date  been 
granted  permission  to  explore  for  oil  under  a  concession  secured  prior  to  the  war. 

Persia. — Not  abstracted;  described  on  page  91  herewith. 

New  York  City,  September  26,  1922. 


[Exhibit  A.] 


Agreement  Between  the  D'Arcy  Exploration  Co.  (Ltd.)  and  the 

Greek  Government. 

The  D'Arcy  Exploration  Co.  (Ltd.),  which  company  is  a  branch  of  the  Anglo- 
Persian  Oil  Co.  and  which  is  henceforth  referred  to  herein  as  "the  company,"  tiiis 
term  being  also  applied  to  its  successors  and  to  any  exercising  its  rights,  is  granted  the 
exclusive  right  to  explore  the  land  in  eastern  and  western  Macedonia  and  to  search 
within  the  limits  of  these  territories  only  for  petroleum,  asphalt,  natural  gases,  bitumi- 
nous shale  and  schist  yielding  petroleum  on  distillation,  under  the  following  con- 
ditions: 

1.  The  duration  of  the  exploration  of  the  territory  referred  to  above  shall  be  five 
years — hereinafter  referred  to  as  "the  period  of  exploration" — commencing  from  the 
publication  of  the  ratification  of  the  present  law. 

2.  It  is  strictly  forbidden  for  any  exploration  to  be  carried  out  on  municipal  or 
communal  spaces  or  roads,  on  any  space  occupied  by  railways,  cemeteries,  archaeo- 
logical sites,  or  any  other  places  of  public  use  or  within  a  distance  of  60  meters  of  any 
habitable  buildings  or  yards  or  gardens  adjoining  these  buildings. 

If  in  the  course  of  tnese  operations  the  land  is  damaged  to  such  an  extent  as  to 
render  cultivation  impossible,  or  if  it  is  held  for  a  period  in  excess  of  a  year,  the  owner 
of  the  land  has  the  right  to  demand  the  expropriation  of  the  territory  which  has  been 
ceded  for  this  purpose  and  to  claim  compensation  therefor,  which  compensation  shall 
be  determined  in  conformity  with  the  law  concerning  the  expropriation  of  private 
property  for  public  purposes. 

3.  The  company  has  the  right  to  remove  samples,  but  it  is  obliged  as  far  as  possible , 
to  restore  the  land  to  its  original  condition  and  to  fill  up  any  openings  which  have 
been  made  in  the  ground. 

4.  During  the  period  of  exploration  the  company  has  the  right,  subject  to  the 
reservations  made  in  paragraph  2  and  excluding  private  gardens,  estates,  and  similar 
property,  to  search  in  any  territory  and  in  any  portion  thereof  and  to  carry  out,  with- 
out let  or  hindrance,  geological  and  topographical  investigations,  as  also  to  carry  out 
excavations  and  borings,  care  being  taken  tnat  any  land  under  crops,  or  where  oUve 
trees,  tobacco,  vines  are  ^own,  or  any  territory  of  a  similar  nature,  are  not  injured. 
The  company,  however,  is  obliged  to  expropriate,  in  accordance  with  the  proceed- 
ings laid  down  in  the  present  agreement  for  such  cases,  and  to  compensate  every 
third  party  for  any  damage  arising  from  these  explorations,  the  amount  of  the  com- 
pensation in  the  event  of  the  parties  concerned  failing  to  agree  being  fixed  by  five 
arbitrators  consisting  of  one  representative  of  the  ministry  of  national  economy,  one 
representative  of  tlie  company,  two  experts,  one  of  whom  shall  be  nominated  by  the 
company,  and  one  by  the  private  individual  concerned,  and  as  president,  the  presi- 
dent of  the  court  of  first  appeal  of  the  district  in  which  the  property  is  situated. 

5.  Within  six  montlis  of  publication  of  the  ratification  of  the  present  law  the  com- 
pany is  obliged  to  commence  its  investigations,  and  from  the  commencement  of  such 
investigations,  and  at  the  end  of  each  year,  the  company  must  submit  to  the  ministry 
of  national  economy  detailed  reports  of  all  its  investigations,  copies  of  all  necessary 
plans  and  charts,  and  details  of  its  general  analyses. 

Independently,  however,  of  these  general  yearly  reports  the  ministry  of  national 
economy  has  the  right  to  call  for  special  reports  from  the  company  in  regard  to  any 
questions  whatever  arising. 

The  company  is  obliged,  three  months  before  the  expiration  of  the  period  of  explora- 
tioai  to  inform  the  ministry  of  national  economy  exactly  which  are  the  districts  to  be 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


97 


included  in  the  final  contract.  Failing  this,  it  will  be  considered  that  it  has  resigned 
all  its  rights  in  connection  therewith.  An  exception  is  made  in  the  case  of  "force 
majeure,  "  as  determined  in  article  11  of  the  present. 

6.  The  company  is  obliged  within  the  third  year  of  the  period  of  exploration  to 
make  use  of  one,  at  least,  prospecting  boring  machine  of  the  type  used  generally  in 
such  operatioixs  either  in  eastern  or  in  western  Macedonia,  adding,  by  the  end  of  the 
exploration  period,  at  least  one  additional  boring  machine  in  each  of  the  two  coun- 
tries for  the  fourth  year  and  similarly  for  the  fifth  year,  so  that  the  total  number  of 
these  machines  installed  during  the  whole  period  of  exploration  shall  be  five.  The 
company,  however,  has  the  right  to  use  these  machines  at  its  own  discretion  in  the 
one  country  or  the  other  as  the  necessity  presents  itself  to  the  company.  "Force 
majeure"  permitting,  these  machines  shall  work  continuously  and  in  the  event  of 
their  being  entirely  unsatisfactory  they  shall  be  replaced. 

The  company  is  obliged  to  deposit,  by  means  of  a  letter  of  guaranty  from  a  bank 
duly  recognized  by  the  Greek  Government  or  by  a  bill  of  the  Athens  Bank  of  Dei)osits 
and  Loans  a  guaranty  of  100,000  drachmas,  which  shall  be  increased  during  the  first 
six  months  of  the  second  year  of  the  period  of  exploration  to  a  total  of  300,000  drach- 
mas, to  insure  the  completion  of  the  work  contemplated  and  of  the  terms  of  the  present 
agreement  as  regards  tne  period  of  exploration. 

This  deposit  will  be  returned  to  the  company  at  the  completion  of  these  operations, 
the  expense  of  any  geological  researches  and  operations  being  included,  or  in  the  event 
of  the  abandonment  of  the  operations  arising  out  of  the  nonexistence  of  profitably 
workable  petroleum,  provided  a  certificate  to  this  effect  is  furnished  by  two  experts. 
The  one  shall  be  nominated  by  the  ministry  and  the  other  by  the  company,  and  in 
the  event  of  their  disagreeing,  an  arbitrator  shall  be  agreed  upon  in  common  by  the 
ministry  and  by  the  company.  Should  they  fail  to  agree  as  to  the  arbitrator,  one 
shall  be  nominated  definitely  by  the  president  of  the  court  of  appeal  in  Athens. 
The  sum  corresponding  to  the  geological  and  excavatory  expenses  is  returnable.  In 
any  contrary  event  the  deposit  reverts  ipso  facto  to  the  State. 

7,  At  any  time  between  the  signature  of  the  present  agreement  and  three  months 
before  the  expiration  of  the  period  of  exploration  the  company  may  inform  the  min- 
istry of  national  economy,  in  writing,  exactly  which  areas  it  selects  for  definite  work- 
ing for  the  purposes  referred  to  above  and  within  the  prescribed  limits  of  eastern  and 
western  Macedonia.  At  the  same  time  the  ministry  of  national  economj'^  is  obliged 
to  grant  to  the  aforesaid  company  or  the  company  referred  to  in  article  8  of  the  pr^ent 
agreement  the  concession  or  concessions  for  the  purpose  of  obtaining  petroleum  and 
the  other  substances  referred  to  above. 

Each  such  concession  shall  in  every  case  be  for  a  period  of  50  years,  commencing 
from  the  date  of  the  letter  notifying  the  acceptance  of  such  concession  in  which  the 
area  to  be  worked  shall  be  defined.  In  addition  to  the  conditions  laid  down  in  the 
present  agreement  the  following  also  shall  be  observed : 

(a)  That  whenever  the  company  or  its  successor  wishes  to  acquire  the  right  to  lay 
down  railways  or  construct  roads  or  sites  for  storehouses  or  sidings,  and  the  installation 
of  the  same,  or  to  add  to  the  sites  which  it  has  acquired,  always  provided  that  they 
are  within  the  prescribed  geographical  limits,  for  the  purpose  of  commercial  exploita- 
tion of  petroleum  and  the  products  connected  therewith,  such  additional  lands  shall 
be  freely  included  in  the  concessions  as  far  as  public  or  unoccupied  lands  are  concerned, 
but  in  the  case  of  privately  owned  lands,  on  payment  of  the  requisite  compensation, 
which,  in  the  event  of  nonagreement,  shall  be  settled  by  the  arbitration  of  the  minis- 
try of  national  economy,  which  shall  be  obliged  to  concede  such  lands  at  the  request 
of  the  company  in  accordance  with  article  32  of  law  G  F  K  D  "concerning  mines" 
(1910).  and  in  reference  also  to  law  G  P  N  A  of  1911  and  103  of  1913. 

(6)  Thrft  the  company  or  its  successors  shall  have  the  right  to  construct,  maintain, 
and  use — on  every  occasion  with  the  permission  of  the  ministry  of  national  economy, 
which  shall  issue  such  permission  in  response  to  a  detailed  application  from  the 
company  or  its  successor,  accompanied  by  the  necessary  diagrams  and  after  examina- 
tion on  the  spot  according  to  the  nature  of  the  work  proposed — one  or  more  pipe  lines, 
telephone  wires,  telegraph  wires,  railways  of  the  same  gauge  as  the  international 
railways,  light  railways,  aerial  railways,  roads,  and  bridges  in  any  part  of  the  territory 
included  in  the  concession.  As  far  as  the  telephone  lines  are  concerned,  they  may 
reach  to  the  extreme  limits  of  the  conceded  territory,  but  as  far  as  the  railways  both 
above  ground  and  underground  are  concerned,  to  any  point  on  the  Greek  coast.  The 
construction  of  railways  in  the  direction  of  the  border  lines  of  neighboring  States  is, 
however,  strictly  forbidden  without  special  permission  on  each  occasion  from  the 
minister  of  national  economy. 

Also,  the  company  or  its  successor  shall  have  the  right  to  erect,  use,  and  maintain 
workmen's  dwellings,  oflSces,  workshops,  and  to  construct  and  to  use  works  for  the 
refining  of  petroleum. 


I 

V 

I 


IkK. 


'^^9'*^^;:^^^m^^mi' 


98 


FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


For  all  the  above  purposes  the  ministry  of  national  economy  shall  grant  to  the 
company  or  to  its  successor  any  necessary  areas  of  unoccupied  Government  land,  on 
payment  of  a  fair  rental  or  of  a  fixed  price  per  hectare,  in  the  same  manner  as  governs 
the  right  of  the  company  and  ite  successor  to  hold  any  private  property;  in  case  of  dis- 
pute the  price  will  be  settled  by  arbitration  in  accordance  with  the  foregoing. 

(c)  That  the  company  or  its  successor,  for  the  whole  duration  of  any  concession,  is 
not  under  obligation  to  pay,  indirectly  or  directly,  any  tax,  duty,  or  "rights"  or  com- 
pensation for  any  territory  greater  than  that  paid  in  similar  circumstances  by  any 
other  company  in  Greece,  such,  however,  to  be  always  in  agreement  with  the  terms 
of  the  present  contract. 

(d)  That  the  company  shall  have  the  right  to  import  into  the  Kingdom  all  the 
machinery  and  tools  necessary  both  for  the  original  installation  and  for  any  extensions 
thereof,  free  of  any  import  duty,  during  the  whole  of  the  period  of  the  present  agree- 
ment, both  for  the  exploration  and  the  exploitation  of  the  territory. 

That  during  the  first  25  years  no  export  duty  phall  be  levied  by  the  Greek  Govern- 
ment on  any  consignments  of  crude  petroleum  or  on  any  of  its  refined  products.  Dur- 
ing the  second  25  years  it  will  be  left  to  the  discretion  of  the  ministry  of  national  econ- 
omy to  decide  whether  or  not  any  consignments  of  crude  p>etroleum  or  any  of  its  refined 
products  shall  be  subject  to  an  export  duty,  but  in  the  event  of  such  a  duty  being 
impoeed,  it  shall  not  exceed  in  amount  one-tenth  of  the  marketable  value  of  the 
product;  and  further,  in  the  event  of  competition,  this  export  duty  shall  be  reduced 
to  such  an  extent  as  to  allow  a  reasonable  clear  prof  t  to  the  company  on  the  capital 
outlay,  such  profit  to  be  de(  ided  upon  by  two  experts  appointed  in  accordance  with 
clause  6  of  the  present  agreement. 

8.  If,  as  a  result  of  the  exploration  work,  petroleum  is  found  in  quantities  which 
both  the  minister  of  national  economy  and  the  company  regard  as  commercial,  then  a 
company  shall  be  formed  in  Greece,  conformable  to  (^reek  laws,  and  with  its  head- 
quarters in  Athens,  for  the  working  of  this  petroleum.  Not  less  than  35  per  cent  of  the 
capital  phall  be  offered  for  subscription  in  Gree<^  e  at  the  pri(  e  of  issue.  This  Greek 
company  shall  work  the  concessions  which  have  been  granted,  and  the  exploration 
company  shall  transfer  the  present  agreement  and  all  the  rights  and  pri\aleges  con- 
tained therein  to  the  Greek  company  for  the  continuation  of  the  work  of  exploration, 
or  for  development  and  working  of  tne  territory  referred  to  in  the  present  agreement. 

There  shall  be  two  Greek  members  of  the  board  of  directors  of  the  above  company  if 
the  board  consists  of  a  total  of  five  members,  four  if  there  is  a  total  of  nine  members, 
and  so  on.  The  minister  of  national  economy  has  the  right  to  nominate  one  of  these 
Greek  members,  according  to  the  terms  of  the  statutes  of  the  company  and  the  duration 
of  this  member's  official  eervice. 

In  the  event  of  the  company  considering  that  it  can  not  exploit  the  substances  whose 
exploration  forms  the  subject  of  this  present  agreement,  due  to  their  nonexistence  in 
marketable  quantities,  it  \n\\  then  withdraw,  declaring  that  it  has  no  longer  any 
rights  under  the  agreement.  Nevertheless,  so  long  as  the  company  considers  that  it 
can  produce  in  marketable  quantities  it  retains  its  rights  under  the  present  agreement, 
even  if  the  Greek  Government  holds  a  contrary  opinion  on  the  subject. 

9.  The  producing  company  is  liable  to  the  payment  of  a  yearly  acreage  tax  of  3 
drachmas  per  hectare  for  each  or  all  the  acres  ceded  to  it,  as  well  as  the  revenue  tax 
referred  to  in  article  7  (c). 

The  producing  company  is  also  liable  to  the  payment  of  a  royalty  of  12  per  cent  on  the 
crude  production  of  the  wells,  either  in  money  or  in  kind,  at  the  option  of  the  ministry. 
Any  quantities  expended  by  the  company  for  working  use  are  deducted. 

The  company  must  divide  the  territory  into  rectangular  sections  each  500  hectares 
in  extent,  and  must  maintain  for  each  such  section  of  proved  petroleum-bearing 
territory,  at  least  one  exploiting  machine  (sonde  d 'exploitation  pyour  le  petrole)  and 
for  the  area  which  is  being  explored,  one  drilling  exploration  machine  for  every 
2,000  hectares. 

The  company  has  the  right  to  abandon  any  portion  of  the  ceded  territory,  with  a  cor- 
responding reduction  in  the  acreage  tax.  The  terms  of  this  agreement  will  no  longer 
be  applicable  to  any  such  abandoned  territory. 

10.  Apart  from  tne  above  royalty  the  company  will  be  obliged  to  sell  to  the  State, 
for  its  own  requirements,  quantities  of  the  commercial  products  of  all  descriptions 
up  to  a  total  of  20  per  cent  of  the  balance  remaining  after  deduction  of  the  royalty. 
Tne  price  at  which  this  shall  be  ceded  shall  be  the  market  price  less  10  per  cent. 

Should  the  need  arise,  the  Greek  Government  has  also  the  right  to  buy,  for  its  inter- 
nal consumption,  at  the  current  market  price,  the  whole  or  any  portion  of  the  balance 
remaining  after  deduction  of  the  royalty  quantity  and  of  the  20  per  cent;  in  this  event, 
however,  the  Greek  Government  is  obliged  to  advise  the  company  three  months  in 


:Z>^ 


flIbMke 


TS 


"•iWi*^"''' 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


99 


advance  of  the  amount  it  proposes  to  take  and  the  period  over  which  it  proposes  to 
take  it. 

11.  The  company  is  not  subject  to  any  of  the  penal  clauses  of  this  present  agree- 
ment in  the  event  of  "force  majeure."  The  permanent  advisory  council  of  the  de- 
partment of  mines  of  the  ministry  of  national  economy  shall  be  the  competent  body 
which  will  decide  as  to  the  existence  of  "force  majeure." 

In  the  event  of  the  advisory  council  giving  a  decision  unfavorable  to  the  company, 
the  company  nevertheless  has  the  right  to  challenge  such  decision  by  appeal  to  the 
minister,  who  decides  finally. 

Increase  in  wages  and  in  the  cost  of  material,  tools,  and  machinery  in  general  is 
not  considered  "force  majeure." 

12.  Letters  and  telegrams  addressed  by  the  company  to  the  ministry  will  be  subject 
to  the  legal  stamp  duties. 

The  ministry  will  accept  no  responsibility  for  any  loss  of  letters  or  telegrams  which 
have  not  been  signed  for  on  delivery. 

13.  At  the  end  of  each  three  months  the  company  is  obliged  to  submit  to  the  ministry 
a  statement  of  its  production  and  of  the  disposal  thereof.  The  royalty  ^v'ill  be  col- 
lected on  the  basis  of  these  production  figures. 

14.  After  the  expiration  of  the  present  contract,  or  any  extension  thereof  in  con- 
formity with  article  18,  say  "fixtures"  installed  by  the  company,  storehouses  and 
building  of  all  kinds  of  wells,  wharves,  roads,  and  bridges,  revert  to  the  Greek  Govern- 
ment, the  company  having  no  claim  to  compensation  in  respect  thereof. 

For  the  remaining  "movable"  material,  namely,  railway  lines  and  railway  rolling 
stock,  working  and  pipe-line  plant,  as  well  as  every  portable  tool  and  machine,  the 
company  is  entitled  to  compensation  at  the  current  price  for  such  of  the  material  as 
the  Greek  Government  wishes  to  retain,  article  6  applying  as  regards  arbitration  to 
such  cases,  and  in  such  an  event  the  Government  is  obliged  to  advise  the  company 
six  months  in  advance,  giving  details  of  what  it  proposes  to  retain. 

15.  The  company  is  obliged  to  give  preference  of  employment  to  skilled  Greek 
engineers,  provided  the  need  arises  for,  and  application  is  received  from  such.  Also 
apart  from  its  own  specialist  workmen  whom  it  is  entitled  to  employ  in  the  absence  of 
similar  skilled  workmen  who  are  Greek  subjects,  it  is  obliged  to  employ  workmen  who 
are  Greek  subjects. 

16.  All  regulations  in  regard  to  damage  to  private  indi\dduals  arising  out  of  the  work 
of  exploitation,  as  also  those  relating  to  compensation  of  workmen  for  injuries  received, 
are  applicable  to  the  present  company. 

17.  No  recourse  may  be  made  to  the  regular  courts,  but  if  any  difference  or  disputes 
arise  between  the  Greek  Government  and  the  company  regarding  the  interpretation 
of  the  rights  and  obligations  of  both  parties  to  the  present  agreement,  such  differences 
or  disputes  shall  be  referred  to  two  arbitrators  in  Athens,  one  of  whom  shall  be  nomi- 
nated by  the  ministry  of  national  economy  and  the  other  by  the  company.  Before 
the  arbitrators  examine  the  matter,  the  two  parties  shall  appoint  a  referee,  and  in  the 
event  of  a  disagreement  as  to  the  person  of  the  referee,  he  shall  be  nominated  by  the 
president  of  the  Athens  Court  of  Appeal.  The  decision  of  the  arbitrators,  or,  in  the 
event  of  their  failing  to  agree,  of  the  referee,  shall  be  final  and  binding  on  the  con- 
tracting parties. 

18.  The  company  shall  have  the  preferential  right  to  an  extension  of  the  exploita- 
tion period  by  a  further  25  years  under  the  same  terms  as  any  other  company  of  stand- 
ing and  of  the  same  character  may  propose  for  further  exploitation. 

19.  The  Government  has  the  right,  by  royal  decree,  to  extend  the  present  agree- 
ment to  any  other  areas  contiguous  with  those  referred  to  in  the  present  agreement. 

20.  The  present  agreement  has  been  drawn  up  in  Greek  and  in  English,  the  Greek 


copy  being  regarded  in  all  circumstances  as  the  official  copy  of  the  a^eement 
21.  The  present  agreement  is  valid  subject  to  ratification  by  the  national  ass 


aembly. 


Exhibit  12. 


EDITORIALS  ON  MONOPOLY  OF  BURMA  OIL  CO.,  THE  PETROLEUM 

REVIEW  (LONDON),  JULY  22,  1905. 

Monopoly  of  the  Indian  Oil  Concessions. — One  of  the  committee  rooms  of  the  House 
of  Commons  was  the  scene  of  rather  an  unusual  meeting  on  Wednesday  last  when  Sir 
Marcus  Samuel,  Bart.,  addressed  a  number  of  Members  of  Parliament  upon  the  subject 
of  the  monopoly  of  the  Indian  oil  concessions.     Our  readers  will  probably  remember 


a 


-^^'r-*ii#^>^;|»|^^iaW(S^^ 


^  I 


100 


FOREIGN   OWNERSHIP   IN    THE  PETROLEUM   INDUSTRY. 


that  at  the  last  meeting  of  the  Shell  Transport  and  Trading  Co.,  Sir  Marcus  Samuel, 
Bart. — the  chairman — pointed  out  the  unfair  monopoly  that  had,  with  the  sanction 
of  the  Indian  Government,  been  gained  by  the  Burma  Oil  Co.,  in  regard  to  oil  con- 
cessions. Elsewhere  we  record  a  brief  report  of  Wednesday's  meeting  and  therefore 
it  is  only  necessary  here  to  say  that  after  tne  explanation  of  Sir  Marcus,  backed  up  by 
speeches  by  Sir  Edward  Sassoon,  Sir  Fortesque  Flannery,  and  other  gentlemen.  It 
was  resolved  to  send  a  deputation  to  the  Secretary  of  State  for  India  to  represent  the 
views  expressed  by  Sir  Marcus  Samuel,  and  to  urge  the  claims  to  the  Shell  Co.  in  the 
matter.  It  certainly  appears  to  us  a  very  serious  matter  to  the  Shell  Co.,  that  the 
producers  of  Burma  oil  should  apart  from  the  great  advantage  which  they  have  in 
regard  to  the  carriage  from  Rangoon  to  India,  be  enabled  to  sell  their  oil  by  reason  of 
the  allowance  in  duty  which  they  have  at  one  penny  per  gallon  less  than  the  Shell  Co. 
can  recover.  When  one  recollects  the  hundreds  of  thousands  of  pounds  spent  by  the 
"ShelP'  and  others  upon  organisations  in  India,  it  stands  to  reason  that  they  should 
make  a  bold  bid  for  ''fairness  all  round." 

The  "•  Shell*'  Company  and  India. — A  number  of  Members  of  Parliament  received  the 
following  circular  one  day  this  week: — "  Dear  Sir. — We  beg  leave  to  request  the  favour 
of  your  attendance  in  Committee  Room  No.  5  at  four  o'clock  next  Wednesday,  to  hear 
a  short  address  upon  the  Mineral  Resources  of  Burmah,^  by  Sir  Marcus  Samuel,  Bart., 
late  Lord  Mayor  of  London.     Your  attendance  is  earnestly  and  especially  requested. ' ' 

The  meeting  on  Wednesday  was  largely  attended,  and  the  gentlemen  present 
listened  with  great  interest  to  Sir  Marcus  Samuel,  who  spoke  with  reference  to  the  oil 
concessions  granted;  with  the  sanction  of  the  Indian  Government,  to  the  Burmah  Oil 
Co.,  and  their  probable  effect  upon  the  Shell  Transport  Co.  He  explained  that  the 
concessions  granted  to  the  Burma  Oil  Co.  practically  gave  to  that  concern  a  monoi)oly 
of  the  oil  trade  in  that  country,  the  Standard  Oil  Co. ,  being  excluded  from  competition. 
He  urged  the  claims  of  the  Shell  Transport  Co.  to  a  participation  in  the  Burmah  oil 
business,  and  contradicted  a  statement  which  had  been  made,  that  the  Shell  Transport 
Co.  was  a  foreign  corporation.  Its  shareholders  included  some  of  the  most  prominent 
men  in  England,  including  several  Members  of  Parliament. 

After  speeches  by  Sir  Edward  Sassoon,  Sir  Fortescue  Flannery,  and  others,  it  was 
resolved  to  send  a  deputation  to  the  Secretary  of  State  for  India,  to  represent  the 
views  expressed  by  Sir  Marcus  Samuel. 


Exhibit  13. 


MEMORANDUM   OF   BRITISH   GOVERNMENT   ON   THE   PETROLEUM 

SITUATION.  APRIL  21,  1921. 

Dispatch  to  His  Majesty's  Ambassador  at  Washington  Inclosing  a  Memo- 
randum ON  THE  Petroleum  Situation. 

Earl  Curzon  to  Sir  A.  Gcddes  (Washington). 

Foreign  Office,  April  21,  1921. 

Sir:  I  transmit  to  your  excellency  herewith  copy  of  a  memorandum  which  has  been 
prepared  by  the  petroleum  department  dealing  with  the  general  petroleum  situation. 

2.  In  view  of  the  public  interest  in  the  question  of  petroleum  supplies  and  in  the 
policy  of  His  Majesty's  Government,  an  attempt  has  been  made  to  give  in  this  memo- 
randum a  summary  of  the  conditions  now  existing  in  this  country,  in  other  parts  of 
the  British  Empire,  and  in  various  foreign  countries.  The  memorandum  will  be  laid 
before  Parliament,  and  you  are  at  liberty  to  make  use  of  the  facts  contained  in  it  in 
replying  to  any  inquiries  which  you  may  receive  on  the  subjects  dealt  with. 
I  am,  etc. 

Curzon  of  Kedleston. 


[Inc'losurc] 
MEMORANDUM    ON    PETROLEUM   SITUATION. 

Statements  have  frequently  appeared  in  the  foreign  press  during  the  past  year  to 
the  effect  that  His  Majesty's  Government  are  cooperating  with  British  commercial 
interests  to  secure  an  undue  share  of  the  petroleum  resources  of  the  world,  and,  while 
they  are  entirely  without  foundation,  they  may  through  constant  repetition  have 
obt-ained  some  credence. 


L.m9'  f'l  <r.\" 


yST^S^T^^EETI 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


101 


Great  Britain  is,  next  to  the  United  States  and  (in  normal  times)  Russia,  the  largest 
consumer  of  oil  in  the  world.  Over  90  per  cent  of  her  navy  is  oil  fired  (as  compared 
with  45  per  cent  before  the  war),  as  is  a  rapidly  increasing  proportion  of  her  merchant 
marine.  Her  present  home  resources  consist  of  one  well  giving  a  daily  production  of 
1  ton,  and  Scottish  shale  fields  which  yield  about  165,000  tons  of  oil  products  annually. 

In  1920  Great  Britain  imported  about  3.368,600  tons  of  oil  (motor  spirit,  kerosene, 
fuel  oil,  lubricants,  etc.)  of  a  total  value  of  £67,000,000.  Of  this,  61  per  cent  in  quan- 
tity and  68  per  cent  in  value  came  from  the  United  States,  37  per  cent  in  quantity 
and  30  per  cent  in  value  from  other  foreign  countries,  and  2  per  cent  in  quantity 
and  2  per  cent  in  value  from  British  possessions.  During  the  war  the  annual  imports 
of  petroleum  rose  as  high  as  5,160,000  tons. 

The  figures  which  have  been  quoted  indicate  that,  although  the  consumption  of 
Great  Britain  per  head  is  only  about  one-sixth  of  that  in  the  United  States,  her  require- 
ments are,  nevertheless,  very  large,  and  are  at  present  met  almost  wholly  from  foreign 
countries  at  an  extremely  high  cost.  Much  has  been  written  as  to  the  so-called 
"closed-door*  policy  in  the  British  Empire,  but  even  if  such  a  policy  was  in  force 
it  would  surely  not*  be  diflicult  to  find  arguments  in  its  favor  in  view  of  the  very 
serious  position  of  the  British  Empire  as  regards  petroleum  supplies.  It  is  proposed, 
however,  to  deal  with  each  part  of  the  Empire  in  turn,  stating  also  the  position  of 
Egypt,  and  to  show  what  the  charge  as  regards  the  "closed  door-*  really  amounts  to. 
At  the  same  time  a  brief  note  will  be  given  of  the  production  and  prospects  of  each 
territory. 

United  Kingdom. — There  it^  no  ban  whatever  on  the  exploitation  of  possible  oil- 
bearing  lands  by  foreigners  or  foreign  companies.  A  regulation,  which  was  introduced 
during  the  war*  restricting  the  participation  of  foreigners  in  British  oil  undertakings 
has  ]>een  withdrawn.  As  already  explained,  the  total  output  of  oil  products  in  Great 
Britain  is  less  than  170.000  tons.*  To  secure  165,000  tons  from  the  Scotch  shale  fields 
it  is  necessary  to  mine  3,000,000  tons  of  shale  and  to  employ  10,000  men,  and  the 
high  costs  have  frequently  menaced  the  existence  of  the  industry. 

Canada.— knnnA  production,  about  34,000  tons,  which  meets  only  a  small  propor- 
tion of  the  Dominion's  requirements.  Favoral^le  indications  have  been  found  in  the 
Northwest  Territories,  but  the  remoteness  of  the  locations  must  render  development 
slow.  Exploitation  in  Canada  is  confined  to  British  registered  companies,  but  it  is 
worth  noting  that  the  most  active  company  in  Canada,  in  regard  to  both  imports  and 
prospecting Vork,  is  Imperial  Oil  (Ltd.),  a  subsidiary  of  the  Standard  Oil  Co.  of  New 
Jersey.  There  are  extensive  shale  deposits  of  varying  richness  in  New  Brunswick 
and  other  Provinces. 

Union  of  South  Africa,  Australia,  New  Zealand,  and  Newfoundland.— -In  none  of 
these  dominions  is  there  at  present  any  general  prohibition  of  the  exploitation  of  oil 
lands  by  foreigners,  though  in  certain  of  the  Australian  States  regulations  introduced 
during  the  war  confined  t;he  issue  of  mining  leases  to  British  subjects.  In  the  northern 
territory  of  Australia  leases  are,  as  in  Canada,  restricted  to  British  registered  companies. 
No  important  production  has  been  obtained  in  any  of  these  countries,  though  shale 
is  worked  on  a  small  scale  in  Australia  and  a  trifling  quantity  of  oil  has  been  obtained 
in  New  Zealand.  Exploration  is  being  carried  on  in  Papua  on  behalf  of  the  Imperial 
and  Australian  Governments,  but  so  far  without  definite  result.  In  Newfoundland 
the  grant  to  a  British  company  of  a  prospecting  license  for  five  years  over  all  unalloted 
Crown  lands  is  being  considered. 

InMa. — Prospecting  or  mining  leases  have  been,  in  practice,  granted  only  to  British 
subjects  or  to  companies  controlled  bv  British  subjects. 

The  production  of  petroleum  in  India  is  about  1,200,000  tons  per  annum,  which  is 
insufficient  to  meet  the  country's  needs.     Large  quantities  are  imported  from  the 
United  States,  the  Dutch  East  Indies,  and,  to  an  increasing  extent,  Persia. 

Trinidad. — In  the  case  of  private  lands  there  is  no  nationality  restriction,  but  the 
lessees  of  Crown  or  alienated*  lands  must  be  British  subjects  or  a  British-controlled 
companv.  Exception  has,  however,  been  made  in  the  case  of  an  American  company 
which,  in  view  of  good  pioneer  work  done  on  private  lands,  has  been  permitted  to 
lease  certain  Crown  lands. 

Trinidad's  annual  production  is  about  295,000  tons,  and  development  is  actively 
proceeding  which  it  is  hoped  will  lead  to  a  material  increase. 

British  Guiana,  British  Honduras,  Nigeria,  and  Kenya  Colony. — Similar  regulations 
as  to  Trinidad.  No  production  and  no  definite  prospects,  but  prospecting  work  is 
being  done  by  two  British  companies  in  Nigeria  and  applications  from  prospectors 
are  under  consideration  in  British  Honduras  and  Kenya. 


i 


** 


■  > 


^' 


•  Lands,  the  surface  of   which   has  been  alienated  by  the  Crown  for  agricultural  purposes  since 
January  17,  1902. 


:  ^mi^P^ : 


■na 


'\ 


v^ 


X 


-^ 


102  FOREIGN   OWNERSHIP  IN   THE  PETROLEUM   INDUSTRY. 


Jamaica  and  Barbado8.~No  nationality  restrictions.  No  production,  but  pros- 
pecting work  18  being  done  by  a  British  company  in  Barbados. 

Eaypt.~No  nationality  restrictions.  Annual  output  155,000  tons,  produced  by  a 
single  company,  which  discovered  a  valuable  deposit  in  1914.  Several  other  firms 
[  nave  recently  started  prospecting  operations. 

Somaliland.~^o  production.  Prospecting  is  being  carried  out  on  behalf  of  Govern- 
ment.    No  nationality  restrictions. 

Sarawak.~Annua.\  production,  150,000  tons.     No  nationality  restrictions. 

/^ruMei.— No  production.  Prospecting  has  been  proceeding  for  a  number  of  years 
without  tangible  result.  Nationality  restrictions  generally  similar  to  those  in 
irinidaa. 

Bntish  North  Borneo.~}^o  production.  No  nationality  restrictions.  Prospectine 
IS  being  earned  on  by  Japanese  and  British  companies. 

The  foregoing  shows  the  extremely  small  oil  production  of  the  British  Empire  and 
the  absence  of  any  general  policy  of  exclusion  of  foreigners.  It  will  be  seen  that  in 
the  vast  areas  of  territory  where  there  are  no  restrictions,  no  foreign  countrv  has  taken 
the  opportunity  of  exploring  for  oil  except  in  the  case  of  British  North  Borneo,  whereas 
m  Canada  and  Trinidad,  where  restrictions  are  in  force,  foreign  capital  has  for  many 
years  past  been  actively  at  work  both  on  its  own  account  and  by  way  of  participation 
m  British  companies.  It  can  therefore  hardly  be  contended  that  the  restrictions 
have  imposed  any  serious  disability  on  foreign  enterprise. 

It  has  to  be  remembered  that  when  such  regulations  were  first  introduced  in  India 
and  else. vhere  the  oil  situation  was  very  different  from  that  prevailing  to-day  The 
problem  was  then  not  so  much  to  find  new  sources  of  oil  as  to  secure  profitable  markets 
for  that  already  produced,  and  there  was  a  real  danger  that  oil  lands  might  be  taken 
up  by  large  oil  companies  and  kept  unworked  so  as  to  maintain  prices. 

Apart  from  this  consideration,  however,  it  is  evident  that  in  regard  to  a  "closed- 
door  policy  no  real  parallel  can  fairly  be  drawn  between  the  British  Empire,  ^^dth 
it3  small  and  scattered  production,  and  a  country  like  the  United  States,  which  at 
present  produces  two  thirds  of  the  world's  output  within  her  home  territorv  With 
no  nationality  re3triction8  it  would  have  been  feasible  for  an  isolated  oil  field,  such 
as  Irinidad  to  be  taken  up  by  German  companies  and  worked  with  German  per- 
sonnel, with  the  result  that  on  the  outbreak  of  war  the  wells  and  plant  might  have 
been,  rendered  useless  and  the  supplies  of  oil  from  this  source  cut  off  for  months 
In  the  United  States,  on  the  other  hand,  the  foreign  holdings  are  bound  to  represent 
only  a  small  proportion  of  the  whole,  and  can  be  no  source  of  danger.  As  a  matter 
of  fact,  the  foreign  companies  to  which  America  has  thrown  her  fields  open  are  mostly 
registered  in  America,  are  staffed  with  Americans,  and  dispose  of  their  production 
in  America. 

Regulations  were  introduce  I  last  year  in  the  Philippines  restricting  the  exploita- 
tion of  certain  lands  to  citizens  of  the  United  States  and  of  the  Philippines  In 
this  action,  in  almost  her  only  detached  territory,  the  United  States  appears  to  be 
adopting  the  very  policy,  and  probably  for  the  same  reason,  for  which  Great  Britain 
has  been  so  loudly  condemned. 

In  Mexico,  United  States  companies  control  at  least  80  per  cent  of  the  production, 
while  British  commercial  interests  have  a  share  in  the  remaining  20  per  cent  which 
IS  largely  Dutch  controlled.  As  the  growing  production  of  Mexico,  which  increased 
from  3,750,000  tons  in  1913  to  23,000,000  tons  in  1920,  is  perhaps  the  predominating 
factor  in  the  oil  situation  to-day,  the  strength  of  the  United  States  position  will  be 
apparent.  Most  of  the  Mexican  production  of  crude  oil  is  at  present  shipped  to 
United  States  refineries. 

In  ('entral  and  South  America  oil  production  is,  except  in  Peru  and  the  Argen- 
tine, still  in  the  initial  stages,  the  only  other  countries  where  commercial  supplies 
have  been  found  being  Venezuela  and  Colombia.  No  evidence  can  be  adduced 
from  any  of  these  countries  of  any  attempt  at  British  domination. 

If  British-Dutch  interests  have  considerable  holdings  in  Venezuela,  American 
companies  are  at  least  equally  prominent  in  Colombia,  while  in  Peru,  where  the  oil 
industry  was  established  l)y  British  enterprise  and  was  at  one  time  almost  entirely  in 
British  hands,  the  control  of  all  producing  companies  but  one  has  passed  to  the  Stand- 
ard Oil  Co. 

Among  the  criticisms  leveled  against  this  country  is  that  of  having  secured  a  mo- 
nopoly in  Per4a.  It  should  hardly  be  necessarv  to  say  that  the  rights  of  the  Anglo- 
Persian  Oil  Co.  in  Persia  have  no  connection  whatever  with  the  British  Government 
holding  in  the  company  but  are  mainly  derived  from  a  concession  which  was  ob- 
tained through  the  personal  enterprise  of  Mr.  W.  K.  D'Arcy  in  1901,  and  for  which  it 
was  equally  open  to  any  other  individual,  British  or  foreign,  to  apply.     It  was  only 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


103 


after  heavy  expenditure  and  much  discouragement  that  success  was  achieved,  to 
the  great  advantage  of  Persia;  and  the  suggestion  that  British  governmental  influence 
was  used  to  force  a  monopoly  on  an  unwilling  country  can  only  be  made  through  com- 
plete ignorance  of  the  facts.  The  British  Government  did  not  acquire  its  present 
holding  in  the  Anglo-Persian  Co.  for  13  years  after  the  concession  was  obtained  by 
Mr.  D'Arcy,  and  it  does  not  interfere  with  the  company's  commercial  policy  in  any 
way. 

Little  need  be  said  of  the  other  fields  in  which  British  interests  are  represented. 
In  Galicia,  where  thej^  were  never  very  important,  they  have  been  reduced  since  the 
armistice,  while  British  firms  have  been  temporarily  driven  from  south  Russia. 
In  Rumania,  a  one-eighth  share  in  an  ex-enemy  company  has  been  acquired  by  a 
British  group,  but  the  British  share  in  the  oil  industry  of  that  country  is  not  more 
important  that  the  American,  French,  or  Dutch. 

The  whole  question  of  Mesopotamia,  which  has  been  fully  dealt  with  in  corre- 
spondence with  the  United  States  Government,  need  not  be  referred  to  here  beyond 
saying  that  while  there  is  no  intention  of  discriminating  against  non-British  interests, 
account  must  be  taken  of  legitimate  rights  acquired  before  the  war,  and  this  applies 
equally  to  Palestine,  where  American  claims  are  understood  to  exist. 

In  conclusion  it  can  only  })e  repeated  that,  although  it  is  hoped  that  British  interests 
will  take  an  increasing  share  in  the  development  of  the  world's  oil  resources,  any 
suggestion  that  British  domination  is  intended  or  possible  is  entirely  unfounded.  It 
has  been  frequently  alleged  that  Great  Britain  has  secured  control  of  half  the  petro- 
leum deposits  of  the  world,  *but  statements  of  this  kind  are  based  on  entirely  inade- 
quate data  and  are  mere  conjectures.  The  United  States  has,  through  her  unique 
natural  resources,  been  able  to  develop  a  vast  industry  with  great  organizations, 
whose  experience,  wealth,  and  energy  make  it  certain  that  her  present  overwhelming 
lead  in  oil  production  will  be  retained  for  many  generations  to  come.  Apart  from  her 
home  deposits  (of  which  fresh  discoveries  coQtinue  to  throw  doubt  on  pessimistic 
forecasts  of  early  exhaustion),  the  United  States  is  already  taking  the  chief  share  in 
the  development  of  the  Mexican  oil  fields  and  is  certain  to  play  a  leading  part  in 
opening  up  those  of  Central  and  South  America  as  well  as  of  other  countries. 

It  is  becoming  increasingly  obvious,  however,  that  there  is  ample  scope  for  the 
activity  and  enterprise  of  all  nations  in  searching  for  and  bringing  into  use  the  world's 
stores  of  petroleum  as  yet  undiscovered. 

Petroleum  Department, 

£  Queen  Annes  Gate  Buildings,  S.  W.  L. 


Exhibit  14. 
SAN  REMO  AGREEMENT. 

Anglo-French  Petroleum  Agreement,  Signed  at  San  Remo,  April  24,  1920. 

1.  By  order  of  the  two  Governments,  France  and  Great  Britain,  the  undersigned 
representatives  have  resumed,  by  mutual  consent,  the  examination  of  an  agreement 
in  reference  to  petroleum. 

2.  This  agreement  is  based  on  the  principle  of  a  cordial  collaboration  and  the 
reciprocity  in  the  countries  where  the  petroleum  interests  of  the  two  nations  can  be 
amalgamated  to  advantage.  The  present  memorandum  refers  to  States  or  countries 
as  follows:  Rumania,  Asia  Minor,  territories  of  the  former  Russian  Empire,  Galicia, 
the  French  colonies,  and  the  colonies  of  the  British  Crown. 

3.  This  agreement  may  be  extended  to  other  countries  by  mutual  consent. 

4.  Ruvmnia.— -The  Governments  of  Great  Britain  and  France  will  lend  their  aid 
to  their  respective  dependents  in  all  negotiations  which  are  to  be  started  with  the 
Rumanian  Government  for — 

(a)  The  purchase  of  oil  and  petroleum  concessions,  shares,  or  other  interests  owned 
by  former  subjects  or  companies  (of  enemy  origin)  in  Rumania,  which  have  been 
sequestered — for  instance,  the  Steaua  Romana,  Concordia,  Vega,  etc. — who  consti- 
tuted in  said  country  the  petroleum  group  of  the  Deutscher  bank  and  the  Discont 
Gezell  Schaft,  at  the  same  time  as  all  other  interests  which  it  may  be  possible  to  take 
over. 

(6)  The  concessions  of  petroleum  fields  owned  by  the  Rumanian  State. 

5.  All  shares  belonging  to  former  enemy  concessions  of  which  one  may  gain  posses- 
sion and  all  other  advantages  drawn  from  these  negotiations  will  be  divided  on  the 


i 


104 


FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


105 


basis  of  50  p>er  cent  to  British  interests  and  50  per  cent  to  French  interests.  It  is 
understood  in  the  company  or  companies  to  be  created  in  order  to  carr>'  out  the 
administration  and  exploitation  of  said  shares,  concessions,  and  other  advantages, 
the  two  countries  are  to  have  the  same  proportion  of  50  per  cent  of  the  capital  sub- 
scribed as  well  as  equal  representation  on  the  board  and  equal  voting  power. 

6.  Territories  of  the  former  Russian  Empire. — In  the  territories  belonging  to  the 
former  Russian  Empire  the  two  Governments  will  give  their  joint  support  to  their 
respective  dependents  in  their  common  efforts  with  the  view  to  obtain  petroleum 
concessions  and  facilities  for  expyort,  and  to  assure  the  delivery  of  petroleum  sup- 
plies. 

7.  Mesopotamia. — The  British  Government  binds  itself  to  concede  to  the  French 
Government,  or  the  representative  appointed  by  same.  25  per  cent  of  the  net  pro- 

^  duction  of  crude  oil  at  the  current  market  price  which  His  British  Majesty's  Govern- 

'  ment  may  draw  from  the  Mesopotamia  petroleum  regions  in  the  event  of  these  regions 
being  made  productive  by  virtue  of  Government  exploitation;  gj  in  the  event  the 
Government  has  recourse  to  a  private  company  to  exploit  the  Mesopotamia  petroleum 
regibns,  the  British  Government  will  place  at  the  disposal  of  the  French  Government 
fi  participation  of  25  per  cent  in  the  said  company.  The  amount  to  be  paid  for  a  par- 
ticipation of  this  kind  should  not  exceed  the  amount  paid  by  any  other  participant 

,  in  tne  said  petroleum  company.     It  is  also  agreed  that  the  said  petroleum  company 

^is  to  be  under  the  permanent  control  of  Great  Britain. 

8.  It  is  mutually  a^eed  in  the  event  of  the  private  petroleum  cgmpauy  being 
constituted  as  aforesaid  the  Government  of  the  country  or  other  local  interests  are 
authorized,  if  they  so  desire,  to  participate  up  to  20  per  cent  in  the  shares  capital  of 
said  company.  The  French  are  to  contribute  one-half  of  the  first  10  per  cent  of  such 
a  local  participation  and  the  balance  will  be  furnished  by  each  participant  in  propor- 
tion to  nis  holdings. 

9.  The  British  Government  agrees  to  lend  their  support  to  any  arrangements  bv 
which  the  French  Government  may  obtain  from  the  Anglo-Persian  oil  supplies  which 
may  be  transported  by  canalization  from  Persia  to  the  Mediterranean  oy  means  of 
any  pipe  line  which  may  have  been  constructed  in  the  interior  of  those  territories 
placed  under  F'rench  mandate,  and  regarding  which  France  has  accorded  special 
facilities,  up  to  25  per  cent,  of  the  oil  so  transported  on  such  tenns  and  conditions 
which  may  be  fixed  by  common  accord  between  the  French  Government  and  the 
Anglo-Persian  company. 

10.  In  consideration  of  the  foregoing  agreement,  the  French  Government  will 
acquiesce,  if  such  desire  is  expressed,  and  as  soon  as  the  request  is  made,  to  the  con- 
struction of  two  pii>e  lines  and  separate  railways,  these  latter  necessitated  for  the 
construction  and  upkeep  of  the  pipe  line  and  for  the  transportation  of  the  oil  emanating 
from  Mesopotamia  and  Persia,  and  traversing  French  spheres  of  influence  up  to  a  port 
or  ports  on  the  eastern  Mediterranean.  The  said  port  or  the  said  ports  are  to  be  chosen 
by  mutual  agreement  by  the  two  Governments. 

11.  In  the  event  of  pipe  lines  or  railways  of  this  nature  traversing  a  territory  in  the 
interior  of  a  zone  under  French  influence,  France  agrees  to  accord  all  facilities  for  the 
right  of  way  (way  leaves)  without  taxes  or  transportation  claims  being  imposed  for 
the  passage  of  such  oil.  An  indemnity,  however,  will  be  due  the  landowners  for  the 
area  so  occupied. 

12.  France  will  also  accord  facilities  in  the  terminal  ports  for  the  acquisition  of 

f)roperty  necessary  for  the  erection  of  depots,  railwav  tracks  (switches),  refineries, 
oading  quays,  etc.  Oil  exported  through  these  installations  is  to  be  exempt  from 
export  and  transit  taxes.  The  necessary  material  for  the  construction  of  the  pipe 
lines,  railways,  refineries,  and  other  installations  is  also  to  be  free  from  all  import 
and  transportation  taxes  and  claims  (titres  de  transport). 

13.  Should  the  said  petroleum  company  \\'i8h  to  establish  a  pipe  line  and  a  railway 
in  the  direction  of  the  Persian  (Julf,  the  British  Government  uill  use  its  good  offices 
in  order  to  facilitate  similar  facilities. 

14.  Northern  Africa  and  other  colonies. — The  French  Government  will  accord 
facilities  to  any  British  group  or  groups  of  good  standing  which  can  offer  the  neces- 
sary guaranty,  which  will  operate  in  conformity  with  French  legislation,  for  the 
acquisition  of  petroleum  concessions  in  the  colonies  of  France  or  in  French  protec- 
torates or  zones  of  influence,  including  Algeria,  Tunis,  and  Morocco.  It  is  well  to 
point  out  that  the  French  Parliament  has  decided  that  groups  formed  under  these  •ji 
conditions  are  obliged  to  contain  at  least  67  per  cent  French  interests. 

15.  The  French  Government  will  facilitate  the  granting  of  all  concessions  in 
Algeria  which  are  now  liable  to  examination  as  soon  as  the  applicants  have  com- 
plied with  all  the  requirements  of  French  legislation. 


16.  Colonies  ofdhe  British  Crown. — As  far  as  the  existing  regulations  will  permit, 
the  British  Government  will  accord  to  the  French  dependents  who  may  desire  to 
explore  and  exploit  petroleum  regions  in  the  Crown  colonies  advantages  corresponding 
to  those  France  has  accorded  to  British  subjects  in  the  French  colonies. 

17.  In  the  foregoing  agreement  the  terms  are  not  applicable  to  the  concessions 
which  may  be  the  object  of  negotiations  already  instituted  between  private  French 
or  British  interests. 

18.  The  present  agreement  has  been  initialed  this  day  by  M.  Philippe  Berthelot 
and  Prof.  Sir  John  Cadman,  subject  to  ratification  by  the  prime  ministers  of  France 
and  Great  Britain,  respectively. 

San  Remo,  April  24, 1920. 

Exhibit  15. 

LETTER  OF  STANDARD  OIL  CO.  OF  NEW  YORK,  FEBRUARY  24,  1922. 

February  24,  1922. 
The  Secretary  of  State, 

Washington,  D.  C. 

Sir:  From  statements  that  have  been  published  in  the  press,  it  would  appear  that 
a  recent  visitor  to  this  country,  who  holds  a  high  place  in  British  oil  circles,  is  endeavor- 
ing to  create  the  impression  that  the  British  Gover;iment  does  not  discriminate  against 
other  than  British  nationals  in  granting  concessions  for  the  production  of  crude  petro- 
leum. 

We  have  laid  before  you  from  time  to  time  as  it  came  to  us  evidence  that  the  British 
Government  follows  a  well-defined  policy  of  discrimination  and  that,  in  so  far  as 
India  and  Burma  are  concerned,  this  discriminatory  policy  has  been  in  force  for  38 
years. 

In  view  of  the  statements  that  are  now  being  made  denying  the  existence  of  a  policy 
of  discrimination,  we  trust  that  you  will  not  consider  it  out  of  place  if  we,  in  refutation 
of  these  statements,  review  our  records  of  the  discriminatory  acts  we  have  experienced 
at  the  instance  of  British  officials,  together  with  other  direct  evidence  that  has  been 
reported  to  us  by  our  representatives  abroad. 

On  March  20,  1902,  the  Colonial  Oil  Co.  of  New  Jersey  (a  subsidiary  of  the  Sftandard 
Oil  Co.  of  New  Jersey)  applied  to  the  Government  of  Burma  for  a  license  to  prospect 
for  oil  in  upper  Burma.  The  application  was  mkde  in  due  conformity  with  the  local 
government  laws  and  requirements  in  that  country  relative  to  prospecting  licenses. 
This  application  was  refused  on  June  9, 1902,  by  the  local  government  of  Burma  under 
instructions  from  the  Viceroy  of  India,  Lord  Curzon,  and  no  reason  whatever  was  as- 
signed for  the  refusal. 

On  June  13, 1902,  similar  permission  for  a  prospecting  license  was  applied  for  on  be- 
half of  the  Anglo-American  Oil  Co.  (Ltd.),  a  British  corporation  registered  in  1888. 
In  addition  to  making  application  for  a  license  to  prospect  for  oil,  and  without  know- 
ledge of  any  government  policy  of  discrimination,  negotiations  were  entered  into  with 
native  owners  of  freehold  property  for  the  development  of  their  land.  Prior  to  receipt 
of  the  official  reply  to  the  A i^lo- American  Oil  Co.'s  application,  Mr.  W.  H.  Libby, 
representing  the  Standard  Oil  Co.,  appealed  to  the  Viceroy  of  India  for  favorable 
consideration  of  the  application.  Mr.  Lioby  also  invoked  the  aid  of  General  Patterson, 
then  United  States  consul  general  in  India,  in  the  presentation  of  the  case  to  the 
viceroy.  In  reply  to  a  request  made  by  General  Patterson  for  an  interview  with  the 
viceroy,  the  Hon.  W.  Lawrence,  private  secretary  to  the  viceroy,  wrote  under  date  of 
October  2,  1902,  that  he  was  directed  to  say: 

"It  is  not  desired  by  the  government  of  India  to  introduce  any  of  the  American 
oil  companies,  or  their  subsidiary  companies,  into  Burma,  and  that  an  interview 
with  the  viceroy  would  not  be  attended  with  any  other  result." 

On  October  2,  1902,  the  local  government  of  Burma  issued  an  order  prohibiting 
private  owners  of  land  in  upper  Burma  from  disposing  of  their  land  to  any  party  not 
first  approved  by  the  government.  This  order  was  issued  at  the  instance  of  the 
government  of  India.  On  October  17,  1902,  the  application  of  the  Anglo-American 
Oil  Co.  was  refused  by  the  government  of  Burma  without  any  reason  being  assigned. 
Representations  backed  by  the  force  of  the  United  States  Government  through  its 
ambassador  in  London  (who  at  that  time  was  J.  H.  Choate)  were  then  made  to  the 
British  Government  authorities  in  London.    The  British  foreign  office  replied  that 

35904—23 9 


\ 


n^ 


iq^ 


'fMmsm:  w-^,ti¥ff»»^B«wp*PWT.< 


-imP'  ^wPt-Tvr?*  :& 


106 


FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


the  o:overnment  of  India  was  not  influenced  in  its  decision  by  the  fact  that  the  appli- 
cant was  an  American  company;  that  the  decision  was  ^iven  after  due  consideration 
had  been  paid  to  the  special  conditions  of  oil  production  in  Burma  and  after  the 
government's  policy  had  been  deliberately  adopted.  They  claim  that  the  ?:overn- 
ment  of  India,  being  the  sole  proprietor  of  the  mineral  wealth  of  the  country  through- 
out the  greater  part  of  India,  are  in  a  different  position  from  that  of  most  other  govern- 
ments, and  have,  consequently,  to  exercise  a  large  discriminatory  power  in  dealing 
with  applications  for  concessions. 

We  pass  without  comment  the  apparent  contradiction  between  the  British  foreign- 
office  expressions,  as  per  the  foregoing,  and  the  Viceroy  of  India's  written  statement 
to  the  Unite<l  States  consul  general  at  Calcutta,  as  quoted  in  the  preceding  part  of 
this  letter  (p.  2,  par.  2).  It  is  also  significant  that  the  government  of  Burma  on 
October  2,  1902,  prohibited  by  notification  any  native  owner  of  freehold  property 
from  disposing  of  his  land  to  any  party  not  first  approved  by  the  government. 

Following  these  rebuffs,  we  abandoned  for  the  time  being  the  idea  of  exploiting 
crude-oil  territory  in  Burma  and  decided  to  confine  ourselves  to  the  departments  of 
manufacture  and  commerce.  With  this  policy  in  view,  we  purchased  adequate  and 
well-located  land  in  the  vicinity  of  Rangoon. 

On  February  27,  1905,  we  applied  for  permission  to  erect  tanks  for  the  storage  of 
oil  in  Burma,  and  on  April  17,  1905,  we  also  made  the  customary  local  application 
for  permission  to  construct  a  refinery.  It  was  our  intention  to  use  these  facilities 
for  the  storing  and  refining  of  crude  oil  to  be  purchased  from  the  many  large  and  smajl 
native  producers.  Both  of  these  applications  were  refused  May  22,  1905,  without 
any  reason  being  assigned.  We  appealed  against  this  decision  to  the  government 
of  India  but  our  appeal  was  of  no  avail. 

Subsequent  to  these  protracted  efforts  to  secure  a  foothold  in  Burma,  we  ascertained 
that  long  prior  to  the  first  application  an  edict,  signed  by  Her  Majesty,  Queen  Victoria, 
had  been  issued  which  debarred  the  entry  into  Burma  of  any  concern  in  which  John 
D.  Rockefeller  or  Pierpont  Morgan  were  interested.  We  also  ascertained  that  an 
agreement  exists  with  the*Burma  Oil  Co.  which  gives  the  Burma  Oil  Co.  certain 
protection  from  foreign  competition  in  the  oil  fielus  of  Burma,  and  one  of  the  pro- 
visions of  that  agreement  is  that  they  undertake  not  to  join  their  interests  in  Burma, 
with  any  American  trust. 

That  such  an  edict  and  such  an  agreement  are  in  effect  is  not  only  demonstrated 
by  events  but  evidence  of  it  is  also  confirmed  by  our  knowledge  of  a  resolution  of 
the  government  of  India,  which  reads  as  follows: 

"No  native  well  owner  of  the  Burma  oil  fields  shall  sell,  lease,  transfer,  mortgage^ 
or  assign  any  well  or  well  sites  to  any  foreign  company,  trust,  or  corporation  without 
the  approval  of  the  government  of  Burma  under  penalty  of  forfeiture  and  confiscation, 
and  the  government  of  Burma  shall  refuse  all  applications  for  prospecting  or  refining; 
from  any  concern  connected  with  Pierpont  Morgan  or  John  D.  Rockefeller  or  any 
company  connected  thereto." 

We  also  have  knowledge  of  a  letter  written  by  the  Burma  Oil  Co.  to  Sir  Hugh  Barnes, 
lieutenant  governor  of  Burma,  in  which  they  refer  to  an  application  from  the  Standard 
Oil  Co.  of  New  York,  and  reauest  that  the  lieutenant  governor  will  forbid  any  footing 
to  the  Standard  Oil  Co.  of  New  York  in  Burma,  on  the  strength  of  an  arrangement 
between  the  Burma  Oil  Co.  and  the  home  government,  whereby  the  home  government 
undertake  to  protect  the  Burma  Oil  Co.  from  foreign  invasion,  especially  from  members 
of  the  American  trusts. 

The  Indian  Government  Gazette  of  March  6,  1915,  contains  an  account  of  an  inter- 
rogation made  by  one  of  the  Indian  members  of  the  Indian  council  and  the  reply 
thereto  by  the  Government  Secretary,  In  reply  to  the  request  by  Sir  Fazulbhoy 
Currimbhoy  that  the  Government  lay  on  the  table  the  papers  in  relation  to  the  policv 
of  the  Government  regarding  concessions  in  respect  of  oil  fields,  the  Hon,  Mr.  Clark 
said: 

"The  papers  relating  to  the  policy  of  the  Government  regarding  concessions  in 
respect  of  oil  fields  are  confidential,  and  I  regret  that  they  can  not  therefore  be  laid 
on  the  table.  Oil  winning  concessions  are  granted  under  the  mining  rules  of  India, 
but  petroleum  is  included  m  what  is  known  as  the  reserved  list  of  minerals,  concessions 
for  which,  as  being  resources  of  national  importance,  are  only  granted  to  British 
subjects  and  to  companies  mainly  British  in  constitution," 

Early  in  1917,  one  of  our  representatives  visited  Sylhet,  in  Assam,  India,  and 
obtained  an  option  expiring  November  15,  1917,  to  purchase  or  lease  land  and  mineral 
rights  from  private  owners  of  freehold  property.  It  was  discovered  by  our  repre- 
sentative that  in  Sylhet  most  of  the  land  haa  been  settled  under  what  is  known  as  the 
"permanent  settlement"  tenure,  and  which  conveyed  absolute  title  to  both  the 
surface  and  underground  rights.     On  July  6,  1917,  our  representative  registered  with. 


■^m^m. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


107 


local  authorities  an  agreement  to  lease  the  private  property  secured  under  the  option 
referred  to  above,  for  the  purpose  of  prospecting  for  oil.  We  were  blocked  in  this 
effort  to  secure  a  foothold  by  a  new  regulation  of  the  Government  of  India,  No.  11917, 
dated  October  6,  and  published  in  the  official  Assam  Gazette  on  October  24,  1917, 
This  regulation  prohibits  any  owner  from  transferring  his  interests  in  a  mine^which 
expression,  it  is  notified,  includes  any  mineral  deposits,  or  land  known  or  believed  to 
contain  a  mineral  deposit  of  commercial  value.  Thus  before  the  expiry  date  (Novem- 
ber 15)  of  our  option  on  the  Sylhet  property  the  Government  of  India  by  its  regulation 
No.  11917  stepped  in  to  prevent  the  transfer  to  us  of  the  petroleum  or  mineral  rights 
on  that  private  property. 

The  form  of  prospecting  license  (received  by  us  in  April,  1921)  issued  by  the  native 
State  of  Kashmir,  situated  on  the  northwest  frontier  of  India,  and  which  is  subject  to 
administrative  direction  and  super\d8ion  of  the  Government  of  India,  bears  the  fol- 
lowing words: 

"The  licensees  shall  at  all  times  during  the  said  term  remain  or  be  British  or  State 
subjects,  or  a  company  or  corporation  of  British  or  State  subjects.  The  chaiiman  or 
president  or  other  persons  occupying  that  or  any  other  similar  position  (if  anj-)  and  the 
managing  director  (if  any)  and  the  majority  of  the  other  directors  (if  any)  shall  be 
British  or  State  subjects." 

It  also  refers  to  a  cardinal  principle  of  the  license  as  being — 

"The  licensees  shall  be  and  remain  British  or  State  subjects  or  a  company  or  cor- 
poration of  British  or  State  subjects  under  British  or  State  control." 

All  of  the  regulations  quoted  and  referred  to  in  this  letter  are  still  in  force. 

We  are  of  the  opinion  that  the  foregoing  information  exhibits  in  a  most  conclusive 
and  convincing  way  the  obvious  determination  of  the  British  Government  to  confine 
all  activity  relative  to  the  production  and  control  of  petroleum  to  its  own  nationals. 

It  has  been  suggested  that  the  Standard  Oil  Co.  of  New  York  might  test  the  position 
again  by  making  an  application  for  a  prospecting  license.  We  would  say  that  we 
stand  ready  tolook  over  the  ground  and  renew  investigations  just  as  soon  as  there  is  any 
convincing  evidence  that  the  oflEicial  attitude  has  changed  and  the  discriminatory 
regulations  either  withdrawn  or  modified. 

We  have  the  honor  to  remain,  sir,  your  obedient  servants. 

Standard  Oil  Co.  of  New  York. 
C.  F.  Meyer,   Vice  President. 


f-  M 


If 
k 

I 
1 


Exhibit  16. 

AGREEMENT   BETWEEN   THE   GOVERNMENT   OF   TRINIDAD   AND   THE 
UNITED  BRITISH  WEST  INDIES  PETROLEUM  SYNDICATE  (LTD.). 

Agreement  With  the  United  British  West  Indies  Petroleum  Syndicate  (Ltd,) 
With  Forms  of  (I)  Exploration  License,  (II)  License  to  Prospect  for  Oh. 
On  Crown  Lands,  (III)  Oil  Mining  Lease,  and  (IV)  Pipe-Line  Agreement, 
Annexed. 

trinidad. 


An  agreement  made  the  21st  day  of  January,  1913,  between  Sir  Reginald  Laurence 
Antrobus,  K.  C.  M.  G.,  C.  B.;  Maurice  Alexander  Cameron,  C.  M.  G.  (late  a  major 
in  His  Majesty's  Corps  of  Royal  Engineers);  and  William  Hepworth  Mercer,  Esq., 
C.  M.  G.,  all  of  Whitehall  Gardens,  in  the  city  of  Westminster,  the  Crown  agents  for 
the  colonies  (who  and  the  Crown  agents  for  the  colonies  for  the  time  being  are  herein- 
after called  "the Crown  agents"),  acting  for  and  on  behalf  of  the  government  of  the 
colony  of  Trinidad  and  Tobago  and  its  dependencies  of  the  one  part  and  the  United 
British  West  Indies  Petroleum  Syndicate  (Ltd.),  whose  registered  oflSce  is  situate  at 
Winchester  House,  old  Broad  Street,  in  the  city  of  London  (hereinafter  called  "the 
syndicate"),  of  the  other  part. 

Whereas  the  syndicate,  in  accordance  with  the  conditions  contained  in  the  land 
regulations  for  the  time  being  in  force  for  the  granting  of  licenses,  have  expressed 
their  intention  to  petition  the  governor  of  the  colony  for  a  license  to  enter  upon  certain 
Crown  lands  to  explore  and  search  for  petroleum  oil  and  other  bituminous  minerals, 
and  thereafter,  subject  to  such  license  being  granted,  propose  to  petition  the  governor 
to  have  granted  to  them  in  accordance  with  the  said  regulations  a  license  to  prospect 
for  oil,  and  intend  to  apply  to  have  granted  to  them,  with  the  consent  of  the  governor 
and  subject  to  the  said  regulations,  an  oil-mining  lease; 


M 


i^^  .■^Wi'f^iL^y^--^7^J^^*:*.a^^'j^. 


iKiJw  u . 


^^. 


108         FOREIGN   OWNERSHIP  IN   THE  PETROLEUM   INDUSTRY. 

And  whereas  the  syndicate  are  desirous  of  entering  into  an  agreement  with  the 
Crown  agents  on  behalf  of  the  said  government  with  reference  to  the  laying  and/or 
connecting  and/or  using  pipe  lines  in  the  said  colony; 

And  whereas  the  terms  and  conditions  of  the  said  licenses  lease  and  i)ipe-line 
agreement  have  been,  subject  to  the  approval  of  the  governor,  settled  and  approved 
between  the  Crown  agents  and  the  syndicate  and  are  set  forth  in  the  forms  of  explora- 
tion license,  license  to  prospect  for  oil,  and  mining  lease  (oil)  and  pipe-line  agreement 
in  the  schedule  hereto: 

Now  it  is  agreed  between  the  said  parties  hereto  as  follows,  that  is  to  say : 

1.  The  syndicate  shall  and  will  within  14  days  from  the  date  hereof  execute  in 
duplicate  and  deliver  to  the  Crown  agents  the  form  of  exi)loration  license  and  pipe- 
line agreement  contained  in  the  schedule  hereto,  and  upon  such  execution  the  Crown 
agents  will  forward  the  same  to  the  governor  of  the  said  colonv  for  his  approval,  and 
when  so  approved  will  deliver  to  the  syndicate  one  part  of 'such  license  executed 
by  the  governor  and  one  part  of  such  pipe-line  agreement  executed  by  themselves. 

2.  The  syndicate  shall,  on  the  execution  of  this  agreement,  pay  to  the  Crown  agents 
the  sum  payable  by  the  Crown  agents  to  their  solicitors  for  and  in  resjject  of  their  costs, 
charges,  and  expenses  in  and  about  the  negotiation,  preparation,  printing,  and  approval 
of  this  agreement  of  the  form  of  exploration  license,  the  form  of  license  to  prospect  for 
oil,  the  form  of  oil-mining  lease  and  the  f  jrm  of  pipe-line  agreement  thereto  annexed, 
and  the  costs  of  the  execution  of  this  agreement  of  such  exploration  license  and  such 
pipe-hne  agreement.  Provided  always  that  the  liabilitv  of  the  syndicate  for  such 
casts,  charges,  and  expenses  shall  not  exceed  the  sum  of  £500.  The  syndicate  will 
also,  on  the  execution  of  such  license  to  prospect  for  oil  and  oil-mining  lease,  respec- 
tively, pay  to  the  Crown  agents  all  further  costs,  charges,  and  expenses  of  their  solicitors 
in  and  about  the  com])leti()n  and  execution  of  such  license  and  lease. 

In  witness  whereof  the  Crown  agents  have  hereunto  set  their  respective  hands  and 
seals  and  the  syndicate  have  caused  their  common  seal  to  be  hereunto  affixed  the  day 
and  year  first  above  written. 

R.  L.  Antrobls. 
M.  A.  Cameron. 
W.  H.  Mercer. 

Signed,  sealed,  and  delivered  by  the  above-named  Reginald  Laurence  Antrobus, 
Maurice  Alexander  Cameron,  and  William  Hepworth  Mercer,  in  the  presence  of— 
Charles  IL  Ommanney, 

S  and  4  Great  Winchester  Street, 

London,  E.  C,  Solicitor. 

The  common  seal  of  the  United  British  West  Indies  Petroleum  Syndicate  (ftd.) 
was  hereunto  affixed  in  the  presence  of — 

C.  Greenway, 
H.  N.  Benjamin, 

Directors. 

[United  British  West  Indies  Petroleum  Syndicate  (Ltd.).] 


L. 

S.l 

L. 

8. 

, 

L. 

S.J 

[The  schedule  hereinbefore  referred  to.) 
(l)    EXPLORATION   LICENSE.' 

This  exploration  license,  made  the day  of 


,  1913,  between  His  Excellency 

Sir  George  Ruthven  Le  Hunte,  G.  C.  M.  G.,  governor  and  commander  in  chief  in  and 
over  the  colony  of  Trinidad  and  Tobago  and  its  dependencies,  vice  admiral  thereof 
intendant  of  Crown  lands,  etc.  (hereinafter  called  "the  governor,"  which  expression 
includes  the  governor  or  officer  for  the  time  being  administering  the  government  of 
the  said  colony)  of  the  one  part  and  the  United  British  West  Indies  Petroleum  Syndi- 
cate (Ltd.)  whose   registered   office   is  situate   at  (hereinafter  called   "the 

licensees")  of  the  other  part. 

1.  In  consideration  of  the  sum  of  £2,  which  has  before  the  execution  hereof  been 
paid  by  the  licensees  to  the  receiver  general  on  behalf  of  the  governor,  permission  is 
hereby  granted  by  the  governor  to  the  licensees  for  the  period  of  12  calendar  months 
from  the  date  hereof  and  thereafter  (provided  the  licensees  shall  give  to  the  governor 
not  less  than  one  calendar  month  prior  to  the  expiration  of  that  period  notice  in  writing 
that  they  desire  such  extension)  for  the  further  period  of  12  calendar  months,  but  sub- 

1  The  exploration  license  was  signed  by  Sir  George  R,  Le  Hunte  on  Mar.  3, 1913. 


'^jte^s^iL^iLa^k 


,MilJkW^.^4. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  109 

ject  to  the  restrictions,  conditions,  and  provisions  hereinafter  contained,  to  enter 
upon  the  lands  described  in  the  schedule  hereunder  written  and  to  explore  and  search 
the  surface  of  the  same  for  petroleum  oil  and  other  bituminous  minerals,  and  for  that 
purpose  to  dig  and  turn  up  the  surface  of  the  land  to  a  depth  of  not  exceeding  20  feet. 

2.  As  regards  such  of  the  said  lands  as  were  alienated  from  the  Crown  subsequent 
to  the  17th  of  January,  1902,  the  licensees  shall  not  be  at  liberty  to  dig  or  disturb  the 
surface  of  such  lands  within  a  distance  of  50  feet  from  any  building  or  outhouse,  hut, 
or  structure,  or  to  cut  down  or  fell  any  timber,  and  they  shall  as  soon  as  conveniently 
may  be  after  such  digging  fill  up  any  hole  that  they  may  have  du^  and ,  as  far  as  possible, 
restore  the  surface  of  the  land  to  its  condition  prior  to  such  digging,  and  they  shall  pay 
to  the  owner  of  such  lands  reasonable  compensation  (to  be  assessed  in  default  of  agree- 
ment by  arbitration  under  the  arbitration  ordinance  No.  41  or  any  ordinance  or  law 
amending  or  replacing  the  same  for  the  time  being  in  force)  for  any  injury  or  damage 
which  they  may  have  done  to  such  lands  by  the  exercise  of  the  powers  conferred  by 
this  permission  and  shall  indemnify  the  government  against  all  claims  and  demands 
which  may  have  been  made  by  the  owner  of  such  lands  or  by  any  other  party  for 
damage  alleged  to  result  from  the  exercise  of  the  powers  hereby  conferred. 

3.  The  licensees  may  remove  any  specimens  or  samples  of  petroleum  oil  or  other 
bituminous  minerals  found  by  them  in  or  upon  the  said  lands  in  the  course  of  their 
exploring  operations  under  this  permission. 

4.  This  permission  shall  not  nor  shall  any  right  or  interest  thereunder  be  assigned 
or  transferred  without  the  consent  in  writing  of  the  governor. 

5.  The  permission  hereby  granted  is  an  exclusive  one. 

6.  On  or  before  the  expiration  of  this  license  the  licensees  shall  be  entitled  to  a 
license  (in  the  form  annexed  hereto)  to  prospect  for  oil  over  all  dr  any  of  the  lands 
described  in  the  schedule  hereunder  written. 

Governor. 


^ 


(II)  license  to  prospect  for  oil  (on  crown  lands). 


This  deed,  made  the day  of 


-,  191—,  between  governor  and  commander  in 


chief  in  and  over  the  colony  of  Trinidad  and  Tobago  and  its  dependencies,  vice  admiral 
thereof,  intendant  of  Crown  lands,  etc.  (hereinafter  called  "the  governor,"  which 
expression  includes  the  governor  or  officer  for  the  time  being  administering  the  govern- 
ment of  the  said  colony)  of  the  one  part  and  the  United  British  West  Indies  Petroleum 

Syndicate  (Ltd.),  whose  registered  office  is  situate  at (hereinafter  called  *Hhe 

licensees)"  of  the  other  part; 

Whereas  the  licensees,  in  accordance  with  the  condition  laid  down  in  the  land  regu- 
lations for  the  time  being  in  force  for  the  granting  of  prospecting  licenses,  have  peti- 
tioned the  governor  for  a  license  to  prospect  for  crude  oil  in  the  lands  specified  in  the 
schedule  marked  "  A  "  hereunder  written  and  undertake  the  due  and  faithful  carrying 
out  of  the  provisions  contained  in  this  deed  and  the  schedules  attached ;  and 

Whereas  the  governor  has  found  that  there  is  no  objection  to  granting  the  said 
license ; 

Now  tills  deed  witnesseth  as  follows: 

In  consideration  oi  the  fees  and  royalties,  covenants,  and  agreements  hereinafter 
reserved  and  contained  on  the  part  of  the  licensees  to  be  paid  and  observed  the  gov- 
ernor doth  hereby  grant  and  demise  unto  the  licensees  the  sole  right  and  license  (sub- 
ject to  the  conditions  hereinafter  contained): 

(1)  To  enter  upon  the  lands  for  the  time  being  comprised  in  this  license  and  to 
mine,  bore,  quarry,  dig,  search  for,  win,  and  work  all  or  any  crude  oil  lying  or  being 
within,  under,  or  throughout  the  said  lands  without  any  interruption,  claim,  or  dis- 
turbance from  or  by  the  governor  or  any  other  person  or  persons  whomsoever; 

(2)  To  carry  away  and  dispose  of  the  produce  thereof  to  and  for  the  use  and  benefit 
of  the  licensees; 

(3)  For  the  purposes  aforesaid  to  clear  undergrowth  and  brushwood  and  (with  the 
sanction  of  the  governor  previously  obtained  in  writing)  to  make  and  use  any  road, 
drain,  or  watercourse  on  the  said  lands  necessary  for  effectually  carrying  on  the  pros- 
pecting operations  hereby  licensed, 

(4)  To  erect  and  bring  upon  the  said  lands  all  such  temporary  huts,  sheds,  and 
structures,  steam  and  other  engines,  machinery  and  conveniences,  chattels  and 
effects,  as  shall  be  proper  and  necessary  for  effectually  carrying  on  the  prospecting 
operations  hereby  licensed ;  reser\ing,  nevertheless,  to  the  governor  full  power  and 
liberty  at  all  times  to  enter  into  and  upon  and  to  grant  or  demise  to  any  person  or 
persons  whomsoever  liberty  to  enter  into  and  upon  said  lands  for  all  or  every  pur- 
pose other  than  those  for  which  this  license  is  issued  but  subject  to  the  rights  hereby 
conferred  and  particularly  (and  without  hereby  in  any  way  qualifjdng  such  general 


I 

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i  ^ 


110 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM   INDUSTRY. 


power  and  liberty)  to  make  on,  over,  or  through  the  said  lands  such  roads,  tram- 
ways, and  railways  as  shall  be  considered  necessary  or  expedient  for  any  purpose, 
and  to  obtain  from  and  out  of  the  said  lands  such  stone,  earth,  timber,  or  other  ma- 
terial as  may  be  necessary  or  requisite  for  making,  repairing,  or  maintaining  such 
roads,  tramways,  or  railways,  or  for  any  other  purposes  and  to  pass  and  repass  at  all 
times  over  and  along  such  roads,  tramways,  and  railways  for  all  purposes  as  occasion 
ehall  require. 

To  have  and  to  hold  the  said  rights,  license,  and  other  the  premises  hereby  granted 
and  demised,  with  their  appurtenances,  unto  the  licensees  for  the  period  of  two  years 
from  the  date  hereof  so  far  as  regards  the  lands  specified  in  the  said  schedule  marked 
"A,"  and  so  far  as  regards  any  further  lands  from  the  dates  when  the  same  respec- 
tively become  subject  hereto,  rendering  and  paying  therefor,  free  and  clear  from  all 
rates,  taxes,  charges,  and  deductions,  the  fees  and  royalties  in  the  schedule  marked 
"B"  hereunder  written,  subject  to  the  right  of  the  licensees  to  use  free  of  royalty 
any  product  or  part  thereof  hereby  licensed  for  the  usual  and  customary  works  con- 
sumption, and  to  win,  use,  and  take,  free  of  royalty,  for  the  purpose  of  experiment 
such  (quantity  of  such  products  not  exceeding  100  tons  during  the  said  period,  as  the 
licensees  may  require. 

COVENANTS   BY   LICENSEES. 

The  licensees  do  hereby  covenant  with  the  governor  as  follows: 

1.  The  licensees  shall  pay  to  the  raceiver  general,  on  behalf  of  the  governor,  the 
said  fees  and  royalties  hereby  reserved,  free  and  clear  of  all  deductions  at  the  times 
and  in  manner  mentioned  in  the  said  schedule  marked  "B,"  and  shall  work  and 
carry  on  the  operations  hereby  licensed  in  a  skillful  and  workmanlike  manner  and 
with  as  little  damage  as  possible  to  the  surface  of  the  said  lands  and  to  the  trees, 
crops,  buildings,  structures,  and  other  property  thereon,  and  will  further  carry  out 
and  conduct  in  the  aforesaid  skillful  and  workmanlike  manner  the  minimum  amount 
of  work  specified  in  the  schedule  marked  "C,"  hereunder  written. 

2.  The  licensees  wdll  take  out  a  license  under  the  Crown  land  forest  produce  rules 
for  the  time  being  in  force  in  respect  of  anv  timber  or  forest  produce  required.  Timber 
and  other  forest  produce  required  for  roid  construction  will  not  be  charged  for. 

3.  The  licensees  will  make  and  pay  reasonable  satisfaction  and  compensation  for 
all  damage  or  injury  to  property  which  may  be  done  in  the  exercise  of  powers  conferred 
bv  this  license. 

4.  The  licensees  'will  at  all  times  indemnify  and  keep  harmless  the  governor  and 
everv  officer  of  the  government  of  the  colony  against  all  actions,  claims,  suits,  and 
demands  whatsoever  which  may  be  made  or  brought  by  anv  persons  whomsoever  in 
respect  of  anv  such  damage  or  injury  as  last  aforesaid  and  against  all  costs  and  expenses 
relating  thereto. 

5.  The  licensees  will  not  grant  or  assign  any  interest  under  this  license  to  any 
person  or  persons  whomseover  Avithout  the  previous  consent  in  writing  of  the  governor, 
and  such  person  or  persons  shall  be  and  remain  British  subjects,  but  such  consent  shall 
not  be  unreasonably  withheld  in  the  case  of  a  responsible  British  grantee  or  assignee 
being  proposed. 

6.  The  licensees  will  comply  with  the  provisions  of  the  Ordinance  No.  13  of  1907,  en- 
tled  "An  ordinance  to  provide  for  the  regulation  of  mines,  borings,  and  quarries,"  and 


titled 


No.  37  of  1000,  entitled  "An  ordinance  to  amend  the  mines  regulation  ordinance,  1907" 
(No.  13,  1907),  or  any  ordinance  or  law  amendingor  replacing  the  same,  respectively, 
and  with  the  rules  made  thereunder  for  the  time  being  in  force. 

7.  The  licensees  will  correctlv  label  and  preserve  for  reference,  as  far  as  reasonably 
practicable,  characteristic  samples  of  the  strata  encountered  and  samples  of  any  crude 
oil  found,  to  which  the  governor  or  his  representative  shall  have  access  at  all  reasonable 
times,  with  power  to  call  for  one  half  of  any  samples. 

8.  The  licensees  wi\[  well  and  truly  measure  or  v.-eigh,  or  cause  to  be  measured  or 
weighed,  upon  some  pirt  of  the  s lid  lands  at  least  once  in  every  month,  and  as  many 
other  t  imes  as  occasion  may  require,  the  whole  produce  which  shall  be  so  won  as  afore- 
said of  crude  oil.  or  such  as  may  be  required  to  be  weighed  or  measured  for  the  purpose 
of  ascertaining  the  amount  of  rovalty  payable  in  respect  thereof,  and  seven  days' 
notice  in  writing,  counting  from  the  date  of  posting  the  same,  of  every  such  measuring 
or  weighing  shall  be  given  to  the  governor  in  order  that  he  may  appoint  some  person 
or  persons  on  his  behalf  to  be  present  at  such  measuring  or  weighing  and  attend  to 
the  proper  conduct  thereof;  and  no  part  of  the  said  produce  shall  on  any  account  be 
taken  away  from  the  said  lands  until  the  same  shall  have  been  so  measured  or  weighed, 
as  the  case  may  be;  provided  that  the  licensees  shall  be  free  to  remove  and  take 
away  any  such  produce,  notice  of  the  measurement  and  weighing  of  which,  if  the 
same  be  required  to  be  weighed  or  measured,  has  been  duly  given  by  them  in  A^Titing 


^^^M^ttAtf^BttiAWMMMW 


''Krmr:^^  wrr^'f'.;^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


Ill 


to  the  governor  or  his  representative,  if  within  seven  days  of  the  receipt  of  such  notice 
no  steps  are  taken  by  tne  governor  or  his  representative  to  verify  the  same,  and  the 
measurements  or  weights  of  such  produce  shown  by  the  licensees'  books  shall  in  such 
case  be  accepted  by  the  governor  and  his  representative  as  accurate. 

9.  The  licensees  will  upon  the  expiration  or  sooner  determination  of  this  license 
or  the  abandonment  of  the  undertaking  hereby  licensed,  whichever  shall  first  occur, 
with  all  convenient  speed  remove  all  buildings,  structures,  engines,  machinery,  and 
other  property  and  effects  erected  or  brought  by  the  licensees  upon  the  said  lands 
under  the  provisions  hereof,  whether  above  or  below  ground,  save  and  except  any 
portion  thereof  either  above  or  below  ground  which  the  governor  may  require  to  take 
at  a  valuation. 

10.  The  licensees  will  within  six  months  after  the  expiration,  or  sooner  determina- 
tion, of  this  license  or  the  date  of  the  abandonment  of  the  said  undertaking,  which- 
ever shall  first  occur,  securely  plug  all  bores  and  fill  up  or  fence  all  holes  and  excava- 
tions that  they  may  have  made  in  the  said  lands  to  such  extent  as  the  governor  may 
require,  and  will  to  the  like  extent  restore  so  far  as  may  be  to  their  natural  or  original 
condition  the  surface  of  the  said  lands  and  all  buildings  and  structures  thereon  which 
the  licensees  may  have  damaged  in  the  course  of  prospecting,  and  shall  have  power 
during  that  period  to  enter  on  the  lands  for  the  purposes  aforesaid. 

11.  The  licensees  will  at  all  times  afford  to  the  governor  or  his  representative  all 
reasonable  facilities  for  checking  the  accuracy  of  the  logs,  measurements,  and  records 
kept  and  made  under  this  license  and  all  such  information  supplied  to  the  governor 
or  his  representative  shall  be  treated  as  confidential  unless  the  consent  of  the  licensees 
has  been  first  obtained  to  its  publication. 

POWER  OP  GOVERNOR. 

If  the  licensees  shall  at  anv  time  refuse  or  neglect  to  observe  or  perform  any  of  the 
terms  and  conditions  of  this  license  the  governor  may,  by  notice  in  writing  signed  by 
him  and  delivered  to  the  licensees,  require  the  licensees  to  remed>^  and  make  good 
the  breach  or  breaches  within  two  calendar  months  from  the  service  of  the  notice, 
and  may,  by  the  notice,  declare  that  in  default  of  their  so  doing  the  license  hereby 
granted  shall  thenceforth  determine,  and  in  such  case  this  license  and  all  rights  and 
liberties  conferred  hereby  or  enjoyed  hereunder  ehall,  on  the  expiration  of  the  said 
period  of  two  calendar  months  (unless  the  licensees  shall  in  the  meantime  have 
remedied  and  made  good  the  breach  or  breaches  referred  to  in  the  notice),  determine 
without  prejudice  to  the  rights  and  remedies  of  the  governor  in  respect  of  any  prior 
breach  or  nonperformance  of  any  or  all  of  the  terms  and  conditions  hereof  on  the 
part  of  the  licensees  and  except  in  respect  of  the  covenants  on  the  part  of  the  licensees 
herein  mentioned  to  be  performed  after  the  expiration,  or  sooner  determination,  of 
this  license  or  after  the  abandonment  of  the  undertaking  hereby  licensed. 

COVENANTS  BY  THE  GOVERNOR. 

The  governor  hereby  covenants  that  if  upon  the  expiration  by  effluxion  of  time  of 
the  term  hereby  granted  he  is  satisfied  that  the  licensees  have  been  prevented  from 
completing  their  search  of  the  said  lands  by  any  cause  other  than  their  own  default, 
then  the  governor  shall,  at  the  request  and  cost  of  the  licensees  in  writing,  renew  the 
license  for  such  further  term,  not  exceeding  two  years,  as  the  licensees  may  desire, 
from  the  expiration  of  the  term  hereby  granted,  subject  to  the  like  conditions  in  all 
respects  as  are  herein  contained,  except  this  covenant  for  renewal  and  except  also 
that  the  fees  mentioned  in  the  said  schedule  marked  "  B  "  shall  not  be  payable  on 
such  renewal.  And  also  that  on  or  before  the  determination  of  this  license  as  regards 
any  lands  (whether  originally  included  in  the  license  or  subsequently  added)  the 
licensees  shall  in  respect  of  crude  oil  have  a  right  to  a  mining  lease  or  leases,  in  the 
form  set  out  in  the  schedule  marked  "D"  hereunder  written,  of  so  much  of  those 
lands  as  the  licensees  may  from  time  to  time  during  the  continuance  of  this  license 
as  regards  such  lands  elect  to  lease.  Provided  that  the  total  area  included  and  to  be 
included  in  all  such  mining  leases  collectively  shall  not  exceed  100,000  acres. 

PROVISIONS   AS   TO   INCLUDING   OTHER  LANDS   AND   GIVING    UP   LANDS. 

It  is  hereby  J^eed  that  the  provisions  of  this  license  and  the  covenants  and  agree- 
ments on  the  part  of  the  licensees  herein  contained  shall  mutatis  mutandis  extend 
and  apply  to  any  further  area  or  areas  over  which  the  licensees  may  from  time  to  time 
hold  a  license  or  licenses  to  prospect  for  oil  in  like  manner  in  all  respects  as  if  such 
further  area  or  areas  had  formed  part  of  the  lands  described  in  the  said  schedule 


^^f'^^\^^y^-mi^:mmm)mg^^i»m^^^3:B^i' 


Wia*j|«S^?,',\,*^^- 


112 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


marked  "A."  And  further  that  the  licensees  may  from  time  to  time  by  notice  in 
writing  to  the  governor  declare  that  they  desire  to  abandon  their  license  with  regard 
to  any  lands  defined  in  such  notice  (whether  forming  a  part  of  the  lands  described  in 
the  said  schedule  marked  "A"  or  of  any  such  further  area  or  areas  as  aforesaid)  and 
thereupon  the  rights  and  obligations  of  the  licensees  with  regard  to  the  lands  specified 
in  such  notice  shall  (save  as  to  any  things  which,  under  the  provisions  hereof,  they 
would  be  liable  to  do  on  or  in  relation  to  such  lands  on  the  determination  or  expiration 
of  this  license)  cease  as  from  the  date  of  such  notice,  but  without  prejudice  to  the 
rights  and  remedies  of  the  governor  in  respect  of  any  prior  breach  or  nonperformance 
by  the  licensees  of  any  of  such  obligations. 

ARBITRATION   CLAUSE. 

If  at  any  time  during  the  continuance  of  this  license  or  after  the  determination 
thereof  any  question  or  dispute  shall  arise  regarding  this  license  or  any  matter  or 
thing  connected  herewith  or  the  powers,  duties,  or  liabilities  of  the  licensees  hereunder 
or  the  amount  or  pa>Tnent  of  any  rent  or  royalty,  then  and  in  all  such  cases  the  matter 
in  difference  shall  be  referred  to  the  decision  of  two  referees  or  their  umpire  pursuant 
to  the  provisions  of  the  arbitration  ordinance  No.  41  or  any  ordinance  or  law  amending 
or  replacing  the  same  for  the  time  being  in  force. 

In  witness,  etc. 

{Schedule  A.] 

All  those  lands  colored  red  on  plans  signed  by  the  subintendant  of  Crown  lands  on 
behalf  of  the  governor  and  by on  behalf  of  the  licensees  and  annexed  hereto. 


of 


[Schedule  B.] 

Fees. — A  payment  of  Is.  per  acre  to  be  paid  upon  the  area  specified  in  Schedule  A 
acres  forthwith  and  upon  any  further  area  or  areas  forthwith  on  the  grant  of  a 


license  in  respect  thereof  or  the  same  becoming  subject  to  the  provisions  of  this  license. 
Royalty. — For  all  crude  oil — which  expression  shall  have  the  same  meaning  as  is 
attributed  thereto  in  Part  X  of  the  form  of  lease  set  out  in  Schedule  D  hereto — or 
other  mineral  hereby  licensed  a  royalty  of  2s.  per  ton  shall  be  paid  to  the  receiver 
general  on  the  net  output  collected  into  the  field  tanks  of  the  licensees  (except  such 
quantity  as  is  herein  granted  free  of  royalty). 

[Schedule  C] 

During  the  period  of  this  license  the  licensees  undertake  to  continue  survey  work 
and/or  to  do  such  testing  of  the  properties  by  means  of  the  drill  or  trial  borings  as 
mav  be  reasonable,  with  the  objectof  arriving  at  the  oil-producing  prospects  of  the  area; 
and  in  this  respect  to  give  due  regard  to  the  reasonable  wishes  of  the  governor.  The 
licenseee  shall  be  free  to  do  such  work  on  such  parts  of  the  area  or  areas  covered  by 
this  license  as  in  their  uncontrolled  discretion — subject  to  the  right  of  the  governor 
mentioned  below — they  may  deem  best  suited  to  ascertain  the  prospective  value  of 
the  prop)ertie8  as  a  whole ;  and  they  undertake  to  provide  as  a  minimum  one  drilling  rig, 
with  a  suitable  number  of  bore  masters  and  appliances,  for  each  10,000  acres — with  a 
minimum  of  four  rigs— for  the  time  being  held  under  or  covered  by  tiiis  license,  and  so 
soon  as  the  best  location  for  an  experimental  hole  has  been  ascertained  by  them,  to 
work  the  drill  with  every  reasonable  dispatch;  and  so  soon  as  the  effect  of  any  hole 
has  been  ascertained,  to  move  that  rig,  with  its  appliances  and  workmen,  without  un- 
due delay  to  another  spot  where  the  experimental  hole  will,  in  their  opinion,  afford 
information. 

The  governor  shall  have  the  right,  when  necessary  to  enable  him  to  decide  upon  any 
applications  received  by  him,  to  purchase  the  surface  of  any  portion  of  the  Crown 
lands  to  require  the  licensees  to  do  prospecting  work  over  any  such  area  selected  by 
him,  provided  that  no  such  area  or  areas  exceed  2,500  acres  in  any  one  year  in  the 
aggregate;  and  provided  also  that  such  work  shall  not  be  required  on  more  than  two 
plots  in  any  one  year. 

[Schedule  D.J 


(III)    MINING   LEASE   (OIL). 


This  deed  made  the 


day  of 


-,  in  the  year  of  our  Lord 


between 


governor  and  commander  in  chief  in  and  over  the  colonly  of  Trinidad  and  Tobago 
and  its  dependencies,  vice  admiral  thereof,  intendant  of  Crown  lands,  etc.  (herein- 
after called  the  "governor,"  which  expression  includes  the  governor  or  officer  for  the 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


113 


time  being  administering  the  government  of  the  said  colony)  of  the  one  part  and  the 
United  British  West  Indies  Petroleum  Syndicate  (Ltd.),  whose  registered  office  is 
situate  at — —  (hereinafter  called  "the  lessees, "  which  expression  shall  where  the 


-,  governor,  granted 


context  so  admits  include  their  assigns)  of  the  other  part: 

Whereas  by  deed  bearing  date  the ,  His  Excellency 

unto  the  lessees  subject  to  the  terms  and  conditions  therein  expressed  the  sole  right 
and  license  to  enter  upon,  mine,  bore,  quarry,  dig,  work,  search  for,  and  win,  and 

work  crude  oil  in  and  under  certain  parcels  of  land  situate  in  the ,  in  the  island 

of  Trinidad,  and  specified  in  the  schedule  marked  "A"  to  the  said  deed,  and  such 
further  lands  as  might  from  time  to  time  be  included  therein,  for  the  term  or  terms 
therein  specified,  with  powers  to  make  and  use  anyroad  drain  or  watercourse  on  the 
said  lands  and  to  erect  and  bring  upon  the  said  lands  all  such  temporary  huts,  sheds, 
and  structures,  steam  and  other  engines  and  machinery  necessary  for  carrying  on  the 
prospecting  operations  thereby  authorized ;  and 

Whereas  by  the  said  deed  now  in  recital  the  governor  covenanted  that  on  or  before 
the  determination  of  the  said  license  the  lessees  should  in  respect  of  crude  oil  be  en- 
titled to  a  raining  lease  in  the  form  of  these  presents  of  so  much  of  the  said  lands  as 
the  lessees  might  desire  to  lease  up  to  100,000  acres;  and 

Whereas  the  lessees  in  exercise  of  the  right  aforesaid  have  called  upon  the  gov- 
ernor to  grant  them  a  mining  lease  of  the  lands  specified  and  delineated  in  Part  I  of 
the  schedule  hereunder  written  and  the  governor  has  agreed  to  grant  their  request 
upon  the  terms  and  conditions  hereinafter  appearing; 

Now  this  deed  witnesseth  as  follows:  In  consideration  of  the  covenants,  provisions, 
and  royalties  hereinafter  reserved  and  contained  the  governor  doth  hereby  demise 
unto  the  lessees  the  lands  mentioned  and  described  in  Part  I  of  the  schedule  here- 
under written  together  with  the  liberties,  powers,  and  privileges  to  be  exercised  in 
connection  with  the  said  lands  mentioned  in  Part  II  of  the  said  schedule,  subject  to 
the  restrictions  and  conditions  which  are  specified  in  Part  III  of  the  said  schedule, 
excepting  and  reserving  out  of  this  demise  unto  the  governor  the  liberties  and  powers 
mentioned  and  specified  in  Part  IV  of  the  said  schedule. 

To  hold  and  enjoy  all  and  singular  the  liberties,  powers,  and  privileges  hereby 

demised  unto  the  lessees  from  the  first  day  of ,  for  the  term  of  50  years  then  next 

ensuing,  yielding  and  paying  to  the  governor  the  several  rents  and  sums  of  money 
mentioned  and  specified  in  Part  V  of  the  said  schedule,  subject  to  the  provisions 
relating  to  rents  expressed  in  Part  VI  of  the  said  schedule.  And  the  lessees  do  hereby 
covenant  with  the  governor  as  in  Part  VII  of  the  said  schedule  is  expressed  and  the 
governor  doth  hereby  covenant  with  the  lessees  as  in  Part  VIII  of  the  said  schedule 
is  expressed  and  it  is  hereby  mutually  agreed  and  declared  by  and  between  the  parties 
hereto  as  in  Parts  IX  and  X  of  the  said  schedule  is  expressed  and  it  is  declared  that 
the  schedule  hereunder  written  shall  be  deemed  part  of  these  presents  and  be  read 
and  construed  accordingly. 

|n  witness,  etc. 

[The  schedule  above  referred  to.] 

PART   I. — THE    LANDS   DEMISED   BY   THIS   LEASE. 

Description  of  property. — All  that  piece  or  parcel  of  land  lying  and  being  delineated 
in  the  plan  hereunto  annexed  and  therein  colored  pink  and  containing  an  area  of 
or  thereal)outs. 

PART  II. — LIBERTIES,  POWERS,  AND  PRIVILEGES  TO  BE  EXERCISED  OR  ENJOYED  BY  THE 
LESSEES,    BUT    SUBJECT   TO    THE    RESTRICTIONS    AND    CONDITIONS  IN    PART   III. 

1.  To  bore.— To  bore,  dig,  sink,  drive,  make,  repair  and  use  all  such  boreholes, 
pits,  shafts,  drifts,  levels,  excavations,  waterways,  and  other  works  as  may  be  neces- 
sary or  proper  for  the  purpose  of  searching  for  and  winning  crude  oil. 

2.  To  appropriate  VMter. — Subject  to  the  approval  of  the  governor  to  appropriate 
and  use  for  any  purpose  connected  with  the  borings  or  works  connected  therewith 
the  water  upon  or  within  any  of  the  said  lands,  and  to  collect  and  impound  the  same 
for  the  purpose  of  working  the  said  borings  or  works,  but  so  that  in  the  exercise  of  this 
privilege  the  lessees  shall  not  deprive  any  lands,  villages,  houses,  or  watering 
places  for  cattle  of  a  reasonable  supply  of  water  as  heretofore  accustomed  and  enjoyed. 

3.  To  appropriate  land  for  stocking. — To  enter  upon,  use,  and  occupy  a  sufficient 
part  of  the  said  lands  adjoining  any  borings  for  depositing  thereon  the  product  of 
the  said  borings  and  all  the  earth,  soil,  and  other  substances  brought  to  the  surface  and 
for  otherwise,  carrying  on  the  works  of  the  said  borings. 


!• 


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■  ^;>^.*L-  '-*«.&'-^:?-"  ~--  *jem'm.^.:'^mt..it*m0^^i»smt>u:imms*-»*^^  ••'«*ik.  •'#it^;..  ^v^rf^swiai?*  a-vI^V' 


114 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


4.  To  refine. — To  refine  oil  in  and  upon  the  said  lands,  whether  for  purposes  of  sale 
or  otherwise,  save  as  hereinafter  proviaed, 

5.  To  lead  and  carry  away  oil. — To  take,  lead,  pipe,  and  carry  away  over  the  said 
lands  the  crude  oil  and  refined  products,  and  to  dispose  of  the  same  at  their  own  will 
and  pleasure,  save  as  hereinafter  provided. 

6.  To  erect  houses. — To  erect,  set  up,  and  make  in,  upon,  and  over  the  said  lands, 
workmen's  houses,  sheds,  engines,  machinery,  furnaces,  buildings,  erections,  pipe 
lines,  railroads,  tramroads,  and  other  roads  and  works  necessary  or  convenient  for  the 
effectual  working  of  the  said  borings,  diggings, 'or  works  connected  therewith,  and  the 
exercise  of  the  several  liberties  and  powers  hereinafter  granted. 

7.  To  dig  gravel,  etc.— To  search  for.  dig.  aud  get  gravel,  sand,  and  stone  within  the 
«aid  lands  for  the  purposes  mentioned  in  this  part  of  the  schedule,  but  not  for  sale. 

8.  To  cut  timber. — Except  as  regards  lands  which  may  have  been  proclaimed  as  a 
forest  reserve  to  cut  down  and  fell  the  timber  now  standing  or  growing,  or  which  at 
anytime  hereafter  may  grow  on  the  said  lands,  for  the  purpose  of  facilitating  ingress  and 
egress  to  and  from  the  said  lands,  and  also  for  the  purpose  of  clearing  lands  for  the 
erection  of  machinery  and  plant  in  connection  with  the  said  borings,  and  also  for  the 
purpose  of  clearing  lands  for  erecting  and  making  habitable  the  said  workmen's  houses  ^ 

PART  III. — BESTRICTIONS  AND  CONDITIONS  AS  TO  THE  EXERCISE  OF  THE  ABOVE 

LIBERTIES,    POWERS,    AND   PRIVILEGES. 

1.  Notice  to  he  given  before  entering  on  lands — Liberty  to  object. — Before  taking  any 
land  for  surface  operations,  the  lessees  shall  give  to  the  subintendent  of  Crown  lands 
14  days'  previous  notice  in  writing  specifying  by  name  or  other  sufficient  designation 
and  by  quantity  the  land  proposed  to  be  taken  and  the  purpose  for  which  the  same 
is  required.  The  subintendent  shall  at  any  time  within  14  days  from  the  receipt  of 
such  notice  state  his  objections,  if  any,  to  the  proposed  site,  and  the  validity  of  such 
objections  in  case  of  dispute  shall  be  determined  oy  reference  to  arbitration,  as  here- 
inafter provided  in  Part  IX  of  this  schedule. 

2.  Timber. — Save  as  provided  in  clause  8  of  Part  II  hereof,  the  lessees  shall  not, 
without  the  express  sanction  of  the  governor,  cut  down  or  injure  any  trees  or  timber 
in  the  said  lands,  but  they  may  clear  away  brushwood  or  undergrowth  which  inter- 
fere with  the  due  exercise  of  the  liberties  and  privileges  above  granted. 

PART  IV. — LIBERTIES   AND   POWERS   OF  THE   GOVERNOR. 

1.  Governor  may  work  other  minerals,  etc. — Liberty  and  power  for  the  governor  o 
any  lessee  or  other  person  authorized  by  him  in  that  behalf  to  enter  into  and  upon 
the  said  lands  and  to  search  for.  dig,  work,  and  get  any  minerals  or  substances  other 
than  crude  oil.  in,  upon,  or  under  the  said  lands  and  for  the  purposes  aforesaid  to  sink, 
make,  erect,  and  use  such  pits,  shafts,  levels,  drains,  watercourses,  tunnels,  buildings, 
engines  or  machinery,  railways,  wagon  ways,  and  other  ways,  works,  and  conveniences, 
upon,  through,  or  under  the  said  lands  as  shall  be  necessary  or  expedient;  provided 
always  that  tha  said  reserved  liberties  and  powers  to  work  for  minerals  or  substances 
other  than  crude  oil  shall  be  exarcised  and  enjoyed  in  such  a  manner  as  not  to  hinder 
or  interfere  with  the  rights  and  privileges  of  the  lessees  under  these  presents,  and 
provided  also  that  fair  and  proper  compensation  shall  be  paid  by  the  governor  for 
all  loss,  damage,  or  injury  which  the  lessees  may  sustain  or  be  put  to  by  reason  or  in 
consequence  of  the  exercise  of  the  said  reserved  liberties  and  powers  to  work  for 
minerals  or  substances  other  than  crude  oil,  the  amount  of  such  compensation  to  be 
settled  in  case  of  difference  by  reference  to  arbitration,  as  hereinafter  provided  in 
Part  IX  of  this  schedule. 

2.  Governor  may  enter  land. — Liberty  and  power  for  the  governor  or  any  lessee  or 
other  person  authorized  by  him  in  that  behalf  to  enter  into  and  upon  the  said  lands, 
and  to  make  and  maintain  upon,  over,  or  through  the  said  lands  such  roads,  tram- 
ways, railways,  and  pipe  lines  as  shall  be  necessary  or  expedient  for  any  purpose, 
and  to  obtain  from  and  out  of  the  said  lands  such  stone,  earth,  and  other  materials 
as  may  be  necessary  or  requisite  for  making,  repairing,  or  maintaining  such  roads, 
tramways,  railways,  and  pipe  lines,  and  to  pass  and  repass  at  all  times  over  and  along 
such  roads,  tramways,  railways,  and  pipe  lines  for  all  such  purposes  as  occasion  shall 
require;  provided  always  that  the  said  reserved  liberties  and  powers  to  make  and 
maintain  roads,  tramways,  railways,  and  pipe  lines  shall  be  exercised  and  enjoyed 
in  such  a  manner  as  not  to  hinder  or  to  interfere  with  the  rights  and  privileges  of  the 
lessees  under  these  presents:  And  provided  also  that  fair  and  proper  compensation 
shall  be  paid  by  the  governor  for  all  loss,  damage,  or  injury— not,  however,  including 
the  value  of  any  stone,  earth,  or  other  materials  taken — which  the  lessees  may  sus- 


'iWSPW'^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


115 


tain  or  be  put  to  by  reason  or  in  consequence  of  the  exercise  of  the  said  resen-ed 
liberties  and  powers,  the  amount  of  such  compensation  to  be  settled  in  case  of  differ- 
ence by  reference  to  arbitration  as  hereinafter  provided  in  Part  IX  of  this  schedule. 

PART   v. — RENTS    RESERVED    BY  THIS    LEASE. 

1.  Certain  half-yearly  rent. — Subject  to  the  provisions  of  clause  2  of  this  part  the 
■certain  half-yearly  rent  of  £5,000  shall  be  paid  by  the  lessees  to  the  receiver  general 
of  the  Colony  from  the  date — ^hereinafter  referred  to  as  the  date  of  the  commencement 
of  the  certain  rent — of  the  expiration  of  five  years  from  the  date  of  these  presents  on 
the day  of and  the day  of in  each  year  for  the  half  year  imme- 
diately preceding  the  first  of  such  half-yearly  payments — to  be  apportioned  if  neces- 
sary—to be  made  on  whichever  of  these  half-yearly  days  shall  happen  next  after  the 
date  of  the  commencement  of  the  certain  rent. 

2.  Royalties. — From  the  commencement  of  the  term  granted  by  this  indenture 
there  shall  be  payable  to  the  receiver  general  on  the  half-yearly  days  aforesaid  in 
each  year  (a)  the  royalty  of  28.  per  ton  of  net  crude  oil  which  shall  have  been  received 
into  the  lessees'  field  storage  tanks  after  deducting  water  and  foreign  matter  and  oil 
used  for  field  purposes  and  (b)  the  royalty  of  Id.  per  1,000  cubic  feet  of  natural  gas 
sold  by  the  lessees:  Provided,  That  from  and  after  the  date  of  the  commencement  of 
the  certain  rent:  (1)  If  the  total  royalties  payable  hereunder  in  respect  of  crude  oil 
in  any  half  year  shall  amount  to  or  exceed  the  sum  of  £5,000  the  certain  half-yearly 
rent  of  £5,000  shall  not  be  payable  in  respect  of  that  half  year;  and  (2)  if  the  total 
royalties  payable  hereunder  in  respect  of  crude  oil  in  any  half  year  shall  be  less  than 
the  sum  of  £5,000  the  amount  paid  in  respect  of  such  royalties  shall  be  deducted  from 
the  certain  half-yearly  rent  of  £5,000  payable  in  respect  of  that  half  year:  Provided, 
That  if  the  quantity  of  net  crude  oil  received  into  the  lessee's  field  storage  tanks 

•during  any  complete  year  commencing  on  the  day  of exceeds  100,000 

tons,  a  deduction  of  sixpence  per  ton  shall  be  made  from  the  royalty  for  every  ton  so 
received  during  that  year,  but  so  nevertheless  that  at  least  the  amount  of  the  said 
•certain  rent  shall  as  from  the  date  of  the  commencement  of  the  certain  rent  always 
be  paid  in  respect  of  each  and  every  half  year.  Any  sum  which  on  the  footing  of 
such  deduction  being  made  the  lessees  may  have  overpaid  shall  be  allowed  from  the 
half-yearly  payment  next  ensuing  after  it  has  been  ascertained  to  be  due  except  in 
the  case  of  the  last  year  of  the  term  when  the  same  shall  be  allowed  out  of  the  last 
half-yearly  payment  for  that  year:  Provided  also.  That  the  governor  shall  have  the 
right  from  time  to  time  to  call  for  the  delivery  by  the  lessess  at  the  place  or  places  of 
production  of  10  per  cent  of  the  crude  oil  there  produced.  In  such  an  event,  the 
lessees  shall  be  relieved  from  royalty  on  the  quantity  of  crude  oil  so  taken  by  the 
governor,  and  on  a  further  quantity  of  crude  oil  equal  to  nine  times  the  quantity  so 
taken  by  the  governor,  and  the  certain  half-yearly  rent — if  and  when  paj  able — shall 
for  the  half  year  in  which  the  crude  oil  is  taken  by  the  governor  be  reduced  by  a  sum 
equal  to  208.  for  every  ton  of  crude  oil  so  taken  by  the  governor  or  15s.  if  the  quantity 
of  net  crude  oil  received  into  the  lessees'  field  storage  tanks  in  the  complete  year 
exceeds  133,333  tons. 

3.  Surface  rent. — The  further  yearly  rental  of  Is.  per  acre  or  part  of  an  acre  of  land 
the  surface  whereof  shall  be  occupied  by  the  lessees  for  any  of  the  purposes  of  this 

demise,  the  said  surface  rent  to  be  paid  by  equal  half-yearly  payments  on  the 

<jay  of ^-  and day  of in  every  year,  the  first  of  such  payments  to  be 

made  on  whichever  of  the  said  days  shall  happen  next  after  such  occupation  or  use 
shall  commence,  and  the  last  half-yearly  payment  thereof  to  be  made  on  whichever 
of  the  said  days  shall  happen  next  after  such  occupation  or  use  shall  have  ceased. 
Provided  always  that  no  such  rent  shall  be  paid  or  demanded  in  respect  of  any  lands 
used  as  roads. 

Provided  also  that  the  lessees  may  at  any  time  elect  to  pay  surface  rent  upon  a 
fixed  amount  of  surface,  provided  that  the  surface  actually  occupied,  wheresoever 
situated  and  whatever  the  number  of  plats,  at  no  time  exceeds  such  amount. 

PART  VI. — ^PROVISIONS   RELATING  TO  THE   RENTS. 

1.  Deductions. — All  the  aforesaid  rents  shall  be  paid  free  from  any  deductions. 

2.  Drawback. — If/in  any  half  year  after  that  for  which  the  first  half-yearly  payment 
of  the  certain  half-yearly  rent  is  made  the  lessees  shall  not  win  or  get  from  or  out  of 
the  said  lands  such  quantity  of  crude  oil  as  at  the  rate  mentioned  in  clause  2  of  Part  V 
of  this  schedule  would  produce  for  that  half  year  the  amount  of  the  certain  rent 
hereby  reserved,  then  and  in  every  such  case  the  lessees  may  in  the  next  succeeding 
half  year  of  the  said  term  but  not  afterwards  win  and  get  from  or  out  of  the  said  borings 


•«wv  --^^M-^,  jfa^i^£;-^'Mr>-^>:  \imi^,'^m».t^mmiiimmmimMaas!^f^  <  --^mr^  '^mmf^^^'^^mit^usMf.issm^ 


'I 


116 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM   INDUSTRY. 


such  a  quantity  of  crude  oil  as  shall  be  required  to  make  up  the  deficiency  without 
paying  any  royalty  for  the  same  other  than  the  said  certain  rent.  But  the  surplus 
of  any  preceding  half  year  or  half  years  shall  not  come  in  aid  of  or  be  applied  to 
make  good  the  deficiency  of  any  subse^iuent  half  year  or  half  years. 

3.  Oil  free  of  royalty. — All  mineral  oil  which  shall  be  certified  by  the  inspector  of 
mines  of  the  colony  for  the  time  being  to  have  been  used  by  the  lessees  for  the  usual 
and  customary  purposes  of  carrying  on  the  works  and  for  domestic  consumption  in 
the  houses  and  offices  of  agents  and  workmen  for  the  time  ])eing  employed  in  and 
about  the  said  borings  and  premises  shall  be  free  from  royalty. 

PART   VII. — THE    lessees'    COVENANTS.  "  ' 

\.  Lessees  to  he  British  company. — ^The  lessees  shall  at  all  times  be  and  remain  a 
British  company  registered  in  Great  Britain  or  a  British  colony,  and  having  its  principal 
place  of  business  within  His  Majesty's  dominions,  and  the  chairman  of  the  said  com- 
pany and  a  majority  of  the  other  directors  shall  at  all  times  be  British  subjects,  and 
tlie  lessees  shall  not  at  any  time  be  or  become  directly  or  indirectly  controlled  by  for- 
eigners or  a  foreign  corporation. 

Inthisclause  the  expression  "foreigner"  means  any  person  who  is  not  a  British  sub- 
ject, and  the  expression  "foreign  corporation"  means  any  corporation  other  than  a 
corporation  established  under  and  subject  to  the  laws  of  some  part  of  His  Majesty's  do- 
minions and  having  its  principal  place  of  business  in  thoee  dominions. 

Any  alteration  in  the  memorandum  or  articles  of  association  or  in  the  constitution 
of  the  lessees  shall  be  reported  to  the  governor,  j)rovided  that  two  months'  previous 
notice  of  the  intention  to  make  any  alterations  which  might  conceivably  affect  the 
British  character  of  the  company  shall  be  given  in  writing  to  the  governor,  who,  if 
in  his  opinion  the  said  alteration  shall  be  contrary  to  the  cardinal  principle  of  this 
deed,  that  the  lessees  shall  be  and  remain  a  British  company  under  British  control, 
may  refuse  his  consent  to  such  alteration. 

If,  and  whenever,  any  such  alteration  as  last  aforesaid  shall  be  made  without  the 
written  consent  of  the  governor,  or  if  the  lessees  shall  at  any  time  cease  to  be  a  British 
company  or  shall  become  a  corporation  under  foreign  control,  or  shall  assign  any  of 
the  liberties,  powers,  and  privileges  hereby  granted,  without  the  previous  consent  in 
writing,  of  the  governor,  the  governor  may  thereupon  cancel  and  determine  all  the 
liberties,  powers,  and  privileges  hereby  granted. 

The  lessees  undertake  that  the  local  general  manager  and  as  large  a  proportion  of  the 
staff  employed  by  them  as  circumstances  may  permit  shall  be  I3ritish  subjects. 

2.  To  pay  rent,  taxes,  etc. — The  lessees  shall  pay  the  rents  and  royalties  hereby 
reserved  at  the  times  and  in  the  manner  above  appointed  in  that  behalf,  and  shall 
also  pay  and  discharge  all  taxc.'^,  rates,  assessments,  and  impositions  whatsoever  which 
shall  from  time  to  time  be  c  harged,  assessed,  or  imposed  upon  the  said  borings  or 
premises  or  any  part  thereof  by  authority  of  the  (iovernment  or  otherwise. 

3.  To  ei'ect  boundary  marks. — The  lessees  shall,  at  their  own  expense,  forthwith  erect 
and  at  all  tifnes  maintain  and  keep  in. repair  boundary  marks  and  pillars  according  to 
the  demarcation  shown  in  the  plan  hereto  annexed,  so  that  the  boundaries  of  the  said 
lands  may  at  all  times  be  clearly  defined. 

4.  To  open  boring  operations — To  uork  continuously. — The  lessees  shall  within  18 
calendar  months  from  the  commencement  of  the  term  hereby  granted  start  and  open 
up  boring  operations  and  shall  work  continuously  ^vith  a  minimum  of  o^e  rig,  appli- 
ances and  workmen  for  each  10,000  acres  under  lease — with  at  no  time  less  than  four 
rigs — and  shall  thereafter  drill  wells  in  an  efficient  and  workmanlike  manner  until  the 
aggregate  output  of  crude  oil  from  the  wells  so  drilled  amounts  to  2^  tons  per  acre 
under  lease  and  shall  thereafter  drill  from  time  to  time  such  additional  wells  as  may 
be  necessary  to  maintain  the  said  output  of  2^  tons  per  acre. 

To  maintain  jyroductive  borings — To  use  lands  solely  for  purpose  of  demise. — The 
lessees  shall  maintain  in  good  repair,  working  order  and  condition,  all  productive 
borings  when  opened,  without  doing  or  permitting  to  be  done  any  unnecessary  or 
avoidable  damage  to  the  surface  of  the  safa  lands  in  or  upon  which  the  said  borings  or 
premises  are  situated,  and  shall  not  cultivate  or  use  the  said  lands  in  any  manner 
save  for  the  purpose  of  this  demise  and  the  rights  hereby  granted. 

5.  Refinery. — As  soon  as  an  output  of  crude  oil  of  a  suitable  quality  for  refining  at 
the  rate  of  50,000  tons  per  annum  is  assured  from  the  areas  for  the  time  being  comprised 

n  this  lease,  the  lessees  shall  prepare  plans  and  proceed  with  all  reasonable  dispatch 
with  the  erection  of  a  refinery  capable  of  dealing  with  at  least  50  per  cent  of  such 
crude  oil  so  as  to  produce  as  great  a  percentage  of  oil  fuel  complying  with  the  Govern- 
ment specification  as  such  50  per  cent  of  crude  oil  will  reasonably  give:  Provided, 
That  if  the  quality  of  the  oil  shall  in  the  opinion  of  the  lessees  permit  the  production 


^ 


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FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


117 


of  oil  fuel  complying  with  the  Government's  specification  by  a  simpler  process  than 
refining,  the  lessees  shall  prepare  plans  and  proceed  with  all  reasonable  despatch  with 
the  erection  of  suitable  works  as  soon  as  an  output  at  the  rate  of  not  less  tnan  25,000 
tons  per  annum  is  assured;  provided,  always,  that  the  volume  of  the  output  shall  in 
either  case  be  assessed  on  the  production  of  not  less  than  six  producing  wells  by 
calculating  the  average  daily  output  over  a  period  of  not  less  tnan  three  calendar 
months 

The  lessees  shall  complete  such  refinery  and/or  works  with  suitable  storage  accommo- 
dation upon  such  site  as  the  lessees  may  with  the  previous  written  approval  of  the 
governor  select — such  approval  not  to  be  unreasonably  withheld,  due  regard  being 
had  to  the  commercial  interests  of  the  undertaking — and  shall  maintain  it  or  them  in 
efficient  working  order  with  all  diligence  and  dispatch  and  shall  from  time  to  time  make 
such  additions  to  the  same  as  may  be  requisite  for  dealing  with  50  per  cent  of  the 
crude  oil  which  the  wells  are  reasonably  expected  to  yield  over  a  prolonged  period, 

6.  Access  of  water. — The  lessees  shall  take  all  practical  measures  to  prevent  the 
injurious  access  of  water  to  the  oil-bearing  formation.  Upon  a  well  proving  to  be  un- 
productive or  ceasing  to  yield  oil  in  paying  quantity  or  being  abandoned  for  any  cause, , 
the  lessee  shall  be  at  liberty  to  withdraw  the  casing  from  the  said  well,  but  in  order  to 
prevent  water  gaining  access  to  the  oil-bearing  formation  the  lessees  shall  immediately 
upon  the  casing  being  withdrawn,  "plug"  the  well  by  filling  it  with  sand,  clay,  or 
otner  material,  as  shall  effect  the  object. 

7.  Governor  may  inspect. — The  governor,  or  any  officer  appointed  by  him  so  to  do, 
shall  be  at  liberty  at  all  reasonable  times  during  the  said  term  to  inspect  and  examine  all 
works  carried  on  by  the  lessees  under  the  lil^erties  and  powers  hereinbefore  granted,  and 
the  lessees  with  proper  persons  employed  by  them  and  acquainted  with  the  working  of 
the  jborings  and  works  shall  effectually  assist  the  governor  or  any  such  officer  in  con- 
ducting such  inspection  and  shall  afford  them  all  information  connected  with  the  work- 
ing of  the  borings  and  works  which  they  may  reasonably  require. 

8.  To  keep  hooks  and  accounts — To  furnish  abstracts. — The  lessees  shall  at  all  times 
during  the  said  term  keep  or  cause  to  be  kept  at  the  office  or  countinghouse  of  the  worl  s 
to  be  situate  in  or  contiguous  to  some  part  of  the  said  lands,  correct  and  intelligible 
books  of  accounts  upon  such  plan  or  principle  and  in  such  form  as  may  be  approved 
by  the  governor,  wnich  books  shall  contain  accurate  entries  of  (1)  the  quantity  of 
crude  oil  won  or  got  from  the  borings  which  have  been  or  may  be  made  or  sunk  by  the 
lessees  under  the  license  and  liberty  in  that  behalf  hereinbefore  contained;  (2)  the 
(quantity  of  crude  oil  subjected  to  any  refined  process  whatsoever;  (3)  the  quantity  of 
refined  products  produced  from  the 'said  crude  oil;  (4)  the  quantity  of  oil  otherwise 
disposed  of,  and  shall  also  at  their  own  expense  furnish  at  such  times  as  the  governor 
may  appoint  true  and  correct  abstracts  of  all  or  any  of  such  accounts  and  returns  and 
shall  at  all  reasonable  times  allow  such  officers  as  the  governor  shall  in  that  behalf 
appoint  to  enter  into  and  have  free  access  to  the  said  office  or  countinghouse  for  the 
purpose  of  examining  the  said  several  books  of  account  and  to  take  copies  thereof  and 
make  extracts  therefrom. 

9.  Lessees  to  keep  plan  of  estate.— The  lessees  shall  at  all  times  during  the  said  term 
cause  to  be  made  and  kept  at  the  said  office  or  countinghouse  true  and  correct  ard 
intelligible  plans  of  the  position  of  all  borings,  workings,  and  operations  which  have 
been  made  and  carried  on,  and  all  such  plans  shall  be  made,  amended,  and  filled 
up  by  and  from  actual  surveys  to  be  made  for  that  purpose  at  the  end  of  every  period 
of  12  months,  and  the  governor  or  his  representative  shall  at  all  reasonable  times 
have  access  to  all  such  plans. 

10.  To  provide  measuring  receptacles. — The  lessees  shall  provide  and  at  all  times 
keep  to  the  satisfaction  of  the  governor  the  usual  means  for  measuring,  and  shall 
measure  or  cause  to  be  measured  therein  all  crude  oil  obtained  from  time  to  time 
from  the  said  borings  and  shall  at  the  end  of  each  day  cause  the  total  quantity  won 
and  got  during  the  previous  24  hours  and  measured  as  aforesaid  to  be  entered  into 
the  aforesaid  l^ook  or  books  of  account,  and  it  shall  be  lawful  for  the  governor  at  all 
times  during  the  said  term  to  employ  any  person  or  persons  to  be  present  at  the 
measuring  of  the  said  crude  oil  and  to  keep  accounts  thereof  and  to  check  the  accounts 
of  the  lessees. 

11.  The  governor  may  test. — The  governor  or  any  officer  appointed  by  him  so  to  do 
may  at  any  time  or  times  during  the  said  term  examine  and  test  the  measuring  recep- 
tacle as  aforesaid  and  the  appliances  used  therewith  in  order  to  ascertain  whether 
the  same  respectively  are  correct  and  in  good  repair  and  order,  and  if  upon  such 
examination  or  testing  any  such  measuring  receptacle  or  appliance  shall  be  found 
incorrect  or  out  of  repair  or  order  it  shall  be  lawful  for  the  governor  or  his  agent  to 
require  that  the  same  be  adjusted,  repaired,  and  put  in  order  by,  and  at  the  expense 
of,  the  lessees,  and  to  prohibit  the  use  thereof  in  the  meantime,  and  if  such  requisi- 


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118         FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 

tion  be  not  complied  with  within  14  days  after  the  same  shall  have  been  made,  the 
governor  or  such  officer  may  cause  the  said  measuring  receptacle  or  appliance,  respec- 
tively, to  be  adjusted,  repaired,  and  put  in  order,  and  may  recover  the  expense  of 
so  doing  from  the  lessees,  and  if  upon  such  examination  or  testing  as  aforesaid  any 
error  shall  be  discovered  in  any  measuring  receptacle  or  appliance,  such  error  shall, 
if  the  governor  so  decide,  be  considered  to  have  existed  for  three  calendar  month* 
previous  to  the  discovery  thereof,  or  from  the  last  occasion  of  so  examining  and  test- 
ing the  same  in  case  such  occasion  shall  be  within  such  period  of  three  months,  and 
the  said  royalty  shall  be  paid  and  accounted  for  accordingly. 

12.  Governor  to  have  right  of  preemption. — The  governor  shall  have  the  right  of  pre- 
emption of  all  oil  or  of  any  of  the  products  thereof  and  shall  have  the  right  to  require 
the  lessees  to  produce  oil  fuel  of  such  consistency,  description,  and  flash  point  as  are 
set  out  in  the  specification  in  Part  X  of  this  schedule  (subject  to  any  alteration  which 
may  be  made  therein  by  mutual  agreement),  and  at  such  monthly  rate  of  production 
witiiin  the  capacity  of  the  lessees'  refinery  as  the  governor  mav  determine,  but  in 
such  latter  case  the  governor  shall  be  bound  to  purchase  the  oil  fuel  so  produced. 
The  lessees  shall  with  every  possible  expedition  and  so  as  to  avoid  demurrage  on  the 
vessel  or  vessels  engaged  to  carry  the  same  do  their  utmost  to  deliver  all  oil  or  prod- 
ucts of  oil  purchased  by  the  governor  under  this  clause  at  the  time  and  in  the  manner 
required  by  the  governor  at  a  mutuallv,  convenient  place  of  shipment  or  at  a  place  of 
storage  in  Trinidad  to  be  determined  by  the  governor,  whether  belonpring  to  the  gov- 
ernment or  otherwise;  provided  that  the  governor  shall  not  exercise  such  rights 
except  in  time  of  war  or  national  emergency  of  the  existence  of  which  the  governor 
shall  be  the  sole  jud^e. 

13.  Demurrage. — Snould  the  governor  exercise  the  right  of  preemption  the  subject 
of  the  immediately  preceding  clause  and  a  vessel  employed  to  carry  any  such  oil  or 

I)roducts  thereof  on  behalf  of  His  Majesty  be  detained  on  demurrage  at  the  port  of 
oading  the  lessees  shall  not  be  called  upon  for  demurrage  unless  the  delay  is  due 
to  the  fault  of  the  lessees. 

In  the  event  of  any  dispute  as  to  such  fault  the  same  shall  be  settled  by  arbitration 
under  the  arbitration  ordinance  No.  41,  or  any  ordinance  or  law  amending  or  re- 
placing the  same  for  the  time  being  in  force. 

14.  Lessees  to  convey  oil  by  existing  means  of  transport. — The  lessees  shall,  if  required, 
convey  the  oil  or  produc'ts  thereof  purchased  by  the  governor  bv  their  existing  means 
of  transport  from  their  refining  works  or  i)lace  of  storage  to  the  lessees'  ordinary  place 
of  shipment,  but  shall  be  entitled  to  make  their  ordinarv  charge  for  such  conveyance. 

15.  Prices  in  preemption. — The  price  to  be  paid  for  all  oil  or  products  of  the  refining 
or  treatment  of  such  oil  taken  by  the  governor  shall  be  either — 

(1)  As  specified  in  a  separate  agreement,  or,  (2)  if  no  such  agreement  shall  have 
been  entered  into  prior  to  the  e  ercise  of  the  right  of  preemption,  the  fair  market 
price  at  the  time  being  as  the  same  shall  be  settled  by  arrangement  ])etween  the 

fovernor  and  the  lessees,  and  in  default  of  such  agreement  the  price  to  be  paid  shall 
<e  referred  to  two  arbitrators,  one  to  be  chosen  by  the  secretary  of  state  for  the 
colonies  and  the  other  by  the  lessees,  with  power  to  appoint  an  umpire  in  case  of 
disagreement,  such  arbitration  to  be  held  in  England  and  to  be  deemed  a  reference 
to  arbitration  under  the  provisions  of  the  arbitration  act,  1889,  of  the  Imperial  Parlia- 
ment or  any  statutory  modification  or  reenactment  thereof  for  the  time  being  in  force. 
To  assist  in  arriving  at  a  fair  market  price  the  lessees  shall  furnish,  for  the  confi- 
dential information  of  the  governor,  if  so  reauired,  particulars  of  the  quantities, 
descriptions,  and  prices  of  oil  or  products  sola  to  other  customers,  and  of  charters 
entered  into  for  freight,  and  shall  e>hibit  to  the  governor  original  or  authenticated 
copies  of  contracts  and  charter  parties  entered  into  for  the  sale  or  freightage  of  such 
oil  or  products,  and  in  fixing  the  sum  to  be  paid,  due  regard  is  to  be  had  to  any  un- 
avoidable waste  or  loss  of  products  caused  by  the  e::ercise  by  the  governor  of  his 
right  of  preemption. 

16.  /«  a  state  of  emergency  lessees  to  increase  supply  of  oil. — On  the  occasion  of  a  state 
of  emergency,  of  which  the  governor  shall  be  the  sole  judge,  the  lessees  shall  use 
their  utmost  endeavors  to  increase  the  supply  of  the  oil  or  products  thereof  for  the 
government  to  the  extent  required  by  the  governor. 

Powers  of  the  governor  in  case  of  war. — In  the  event  of  war  or  on  the  occasion  of  a 
state  of  emergency,  of  which  the  governor  shall  be  the  sole  judge,  the  governor  may 
take  control  of  the  works,  plant,  and  premises  of  the  lessees,  and  the  lessees  shall 
conform  to  and  obey  all  directions  issued  by  the  governor  or  on  his  behalf.  Com- 
pensation shall  be  paid  to  the  lessees  for  any  loss  and/or  damage  sustained  by  the 
lessees  by  reason  of  the  exercise  by  the  governor  of  the  powers  conferred  by  this 
clause.    Any  such  compensation  shall  be  settled  by  agreement  between  the  governor 


.^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


119 


and  the  lessees  or,  in  default  of  agreement,  by  arbitration  in  manner  provided  by  the 
last  preceding  clause. 

17.  Agent  and  notices. — The  lessees  shall  at  all  times  have  on  the  said  lands  an  office, 
with  a  dfuly  accredited  a^ent,  at  which  and  on  whom  all  notices  may  be  served  and 
to  whom  all  communications  from  the  governor  may  be  made.  If  there  shall  not  at 
any  time  be  such  an  office  or  agent  on  the  premises,  the  governor  shall  be  at  liberty 
to  treat  any  other  person  there  as  such  agent  and  to  serve  all  documents  upon  any 
such  other  person,  as  aforesaid.  In  the  case  of  there  being  no  such  other  person,  as 
aforesaid,  then  the  affixing  of  such  notice  upon  some  conspicuous  portion  of  the  said 
premises  shall  be  deemed  to  be  good  and  effectual  service  thereof.  All  notices  and 
communications  from  the  lessees  to  the  governor  may  be  served  or  made  by  writing 
addre&sed  to  the  colonial  secretary  at  Port  of  Spain. 

18.  To  pay  compensation  for  injury  to  property  and  rights  of  other  parties. — The  lessees 
shall  make  and  pay  reasonable  satisfaction  and  compensation  for  all  injury  which 
may  be  done  by  them,  their  agents,  and  servants  in  exercise  of  the  liberties  and  powers 
hereby  granted  to  the  proi)erty  and  rights  of  other  parties,  and  shall  at  all  times  save 
harmless  and  keep  indemnified  the  governor  from  and  against  all  actions,  suits,  claims, 
and  demands  by  such  parties  in  respect  of  ajiy  such  injury.  'In  default  of  agreement, 
the  amount  of  any  such  compensation  shall  be  settled  by  arbitration  under  the  arbi- 
tration ordinance  No.  41,  or  any  ordinance  or  law  amending  or  replacing  the  same, 
for  the  time  being  in  force. 

19.  To  deliver  up  boring,  etc.,  in  good  order. — The  lessees  shall  at  the  end  or  sooner 
determination  of  the  said  term  deliver  up  to  the  governor  in  good  order,  repair,  and 
condition  and  fit  for  further  working  all  then  existing  productive  wells  or  borings 
which  shall  have  been  made  by  the  lessees  under  the  liberty  and  power  in  that  behalf 
hereinbefore  contained,  together  with  all  engines,  lining,  casings,  and  fixtures  below 
ground  level  and  which  can  not  be  moved  without  causing  injury  to  the  said  borings, 
except  borings  or  other  works  which  shall  have  been  abandoned  or  disused  in  me 
ordinary  and  fair  course  of  working  of  the  said  borings  and  premises. 

20.  Lessees  not  to  assign  lease. — ^The  lessees  shall  not  assign,  underlet,  or  part  with 
possession  of  the  demised  premises  or  any  part  thereof  or  their  interest  therein  here- 
under without  the  previous  consent  in  writing  of  the  governor,  but  such  consent  shall 
not  be  unreasonably  withheld  in  the  case  of  a  responsible  British  assignee  or  under- 
lessee  being  proposed  who  being  an  individual  shall  be  and  remain  a  British  subject, 
or,  being  a  company  shall  be  a  British  company  as  defined  by  clause  1,  Part  Yll  of 
these  presents,  provided,  that  in  the  event  of  the  proposed  assignee  or  underlessee 
being  a  British  company  as  last  aforesaid  such  consent  shall  be  only  granted  on  the 
condition  of  such  company  executing  such  assurance  as  the  governor  shall  approve 
by  which  such  company  agree  to  be  bound  to  observe  the  provisions  of  clause  1,  Part 
VII,  of  these  presents  as  if  they  had  been  named  therein  as  lessees. 

PART  Vni. — THE  governor's  COVENANT. 

1.  For  quiet  enjoyment. — The  lessees  paying  the  rents  and  royalties  hereby  reserved 
and  observing  and  performing  the  covenants  and  provisions  herein  contained,  and 
on  their  part  to  be  observed  and  performed,  shall  and  may  peaceably  and  quietly  hold 
and  enjoy  the  rights  and  privileges  hereby  demised  for  and  during  the  term  hereby 
granted  without  any  lawful  interruption  from  or  by  the  governor  or  any  person  right- 
fully claiming  from  or  imder  him. 

2.  Renewal. — If  the  lessees  shall  be  desirous  of  taking  a  renewed  lease  of  the  said 
lands  for  a  further  term  of  30  years  from  the  expiration  of  the  said  term,  and  of  such 
desire  shall,  prior  to  the  expiration  of  such  last-mentioned  term,  give  to  the  governor 
six  calendar  months'  previous  notice  in  writing  and  shall  pay  the  said  rents  and  royal- 
ties hereby  reserved  and  observe  and  perform  the  several  covenants  herein  contained 
and  on  the  part  of  the  lessees  to  be  observed  and  performed  up  to  the  expiration  of  the 
said  term  hereby  granted,  the  governor  shall  offer  to  the  lessees  a  renewed  lease  of  the 
said  premises  for  the  further  term  of  30  years  at  the  same  surface  rent  and  under  and 
subject  to  the  same  covenants,  provisions,  and  agreements  as  are  herein  contained,  but 
subject  to  the  payment  by  the  lessees  of  such  increased  certain  half-yearly  rent  and 
royalties  as  may  be  then  fixed  by  the  governor,  provided  that  in  neither  case  shall  the 
increase  exceed  50  per  cent,  and  the  lessees  shall  be  entitled  to  a  renewal  on  the  said 
terms  and  subject  to  the  payment  of  the  said  increase  of  certain  half-yearly  rent  and 
royalties  in  priority  to  any  other  applicant. 

3.  Power  to  remove  works,  etc. — The  lessees  may  (subject  to  the  provisions  of  clause  19 
of  Part  VII  of  this  schedule)  at  any  time  or  times  within  six  calendar  months  after 
the  determination  of  this  lease,  whether  by  etPuxion  of  time  or  otherwise,  enter  into 
and  upon  the  said  lands  or  any  part  thereof  for  the  purpose  of  taking  down,  remo\ing 


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FOREIGN   OWNERSHIP   IN   THE  PETROLEUM   INDUSTRY. 


and  disposing  of,  for  their  own  use  and  benefit  all  the  machinery,  utensils,  imple- 
ments, articles,  and  things  set  up  and  used  in  and  about  the  working  of  the  said 
borings,  and  all  refineries,  ovens,  stills,  kilns,  sheds,  huts,  railways,  tramways,  pipe- 
lines, and  other  works  (except  buildings  and  erections  of  brick  or  stone)  erectea  and 
then  standing  upon  any  of  the  said  lands  for  the  purpose  of  working  the  said  lands  for 
crude  oil,  unless  the  governor  shall  be  desirous  of  purchasing  the  same  or  any  of  them 
in  pursuance  of  the  provision  in  that  behalf  hereinafter  contained. 

PART  IX. — GENERAL  PROVISIONS. 

1.  Power  of  distress. — If  the  rents  or  royalties  hereby  reserved,  or  any  of  them,  or 
any  part  thereof,  respectively,  shall  be  unpaid  for  the  space  of  two  calendar  months 
next  after  any  of  the  days  whereon  ihe  same  ou^ht  to  be  paid,  then  and  so  often  as 
the  same  shall  happen,  the  governor  may  enter  into  and  upon  the  said  lands  which 
shall  for  the  time  being  be  possessed  or  occupied  })y  the  lessees  for  the  purpose  of  this 
lease  and  may  distrain  all  or  any  of  the  stock  of  crude  oil,  refined  products,  engines, 
plant,  live  and  dead  stock,  and  things  which  shall  l)e  found  in  or  upon  the  said  premises 
and  the  same  may  take,  lead,  drive,  carry  away,  impound,  detain,  and  keep  until  the 
rent  or  royalty  which  shall  lie  due,  and  all  costs  and  expenses  occasioned  by  the  non- 
payment thereof,  shall  be  fully  paid  and  satisfied. 

2.  Power  of  reentry. — Tf  the  rents  or  royalties  hereby  reserved  or  any  of  them  or  any 
part  thereof,  respectively,  shall  be  unpaid  for  the  space  of  six  calendar  months  next 
after  any  of  the  days  whereon  the  same  ought  to  be  paid  as  aforesaid,  and  whether  the 
same  shall  have  been  legally  demanded  or  not,  or  if  the  lessees  shall  commit  any 
breach  of  the  covenants  or  conditions  contained  in  this  lease  and  on  their  part  to  be 
observed  and  performed  or  any  of  them  then  and  in  such  case  it  shall  be  lawful  for 
the  governor  at  any  time  thereafter,  and  although  he  may  not  have  taken  advantage 
of  some  previous  default  of  a  like  nature  in  and  upon  the  said  borings  or  premises  or 
any  part  thereof  in  the  name  of  the  whole,  to  reenter  and  the  same  to  have  again 
repossess  and  enjoy  as  of  his  former  estate. 

3.  Abando7i7nent. — If  the  operations  for  winning  crude  oil  shall  be  abandoned  or 
discontinued  for  12  months,  the  governor  may  thereupon  give  the  lessees  notice  in 
writing  of  such  abandonment  or  discontinuance  and  call  upon  them  to  resume  opera- 
tions, and  in  the  event  of  such  operations  not  being  resumed  to  the  satisfaction  of  the 
governor  within  two  calendar  months  from  the  date  of  such  notice,  the  governor  may 
thereupon  cancel  and  determine  this  lease  and  all  the  powers  and  privileges  granted 
unJer  this  lease. 

4.  Proviso  for  governor  to  purchase. — If  at  the  end  or  sooner  determination  of  the  said 
term  the  governor  shall  be  desirous  of  purchasing  all  or  any  of  the  buildings,  works, 
railways,  pipe  lines,  or  other  things  set  up  or  constructed  by  the  lessees  and  shall  sig- 
nify such  his  desire  by  notice  in  writing  to  the  lessees  six  calendar  months  at  least 
before  the  expiration  of  the  said  term  (or  if  the  said  term  shall  be  determined  under 
the  power  of  reentry  hereinbefore  contained  at  any  time  within  three  calendar  months 
after  the  determination  of  the  said  term)  the  lessees  shall  sell  to  the  governor  all  or  any 
of  the  said  buildings,  works,  railways,  pipe  lines,  or  other  things  at  a  price  which 
failing  agreement  shall  be  fixed  by  arbitration. 

5.  Right  of  lessees  to  determine. — If  at  any  time  during  the  continuance  of  this  lease 
the  said  borings  or  premises  shall  become  destroyed  or  rendered  substantially  and  per- 
manently unfit  for  the  purposes  of  this  lease  by  tempest  or  flood,  or  violence  of  any 
army  or  mob  or  other  irresistible  force,  these  presents  shall,  at  the  option  of  the  lessees, 
be  void,  provided  that  if  the  injury  be  occasioned  by  the  wrongful  act  or  default  of  the 
lessees  or  their  servants  they  shall  not  be  entitled  to  avail  themselves  of  the  benefit  of 
this  provision,  and  provided  also  that  if  this  lease  shall  become  void  for  or  by  reason  of 
any  of  the  causes  aforesaid  it  shall  be  without  prejudice  to  the  rights  and  remedies  of 
the  governor  under  or  by  virtue  of  these  presents  for  the  recovery  of  any  rent  or 
royalty  which  may  then  remain  unpaid  or  in  respect  of  any  breach  which  may  have 
been  committed  of  any  of  the  covenants  herein  contained  en  the  part  of  the  lessees. 

6.  I(km. — If  at  any  time  during  the  continuance  of  this  lease  the  said  borings  or 
works  shall  become  unworkable  at  a  reasonable  profit  in  accordance  with  this  lease 
and  the  lessees  shall  give  notice  in  writing  to  the  governor  to  that  effect,  and  of  their 
desire  to  terminate  the  lease  at  the  end  of  12  calendar  months  from  the  date  of  notice, 
then  this  lease  shall  determine  at  the  end  of  such  12  calendar  months  as  if  it  had  been 
terminated  by  lapse  of  time. 

7.  Power  to  include  further  lands. — The  provisions  of  this  lease  and  the  covenants 
and  agreements  on  the  part  of  the  lessees  herein  contained  shall  mutatis  mutandis — 
but  not  so  as  to  increase  the  said  certain  rent—  apply  to  any  further  area  or  areas  which 
may  at  any  time  during  continuance  of  this  lease  be  included  therein  in  like  manner 


\ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


121 


in  all  respects  as  if  such  further  area  or  areas  had  formed  part  of  the  lands  described 
in  Part  I  of  this  schedule:  Provided,  That  the  total  area  at  any  one  and  the  same  time 
held  by  the  lessees  and  their  assigns,  if  any,  upon  the  terms  of  this  lease  shall  not  with- 
out the  special  permission  of  the  governor  exceed  100,000  acres. 

8.  Power  to  give  up  lands. — The  lessees  may  from  time  to  time  by  not  less  than  three 
calendar  months'  notice  in  writing  to  the  governor  declare  that  they  desire  to  abandon 
the  rights  hereby  conferred  on  them  in  relation  to  any  lands  defined  by  such  notice — 
whether  forming  part  of  the  lands  described  in  Part  I  of  this  schedule  or  of  any  such 
further  area  or  areas  as  aforesaid — and  in  such  case  the  rights  and  obligations  of  the 
lessees  hereunder  in  relation  to  the  lands  described  in  such  notice  shall  cease  as  from 
the  expiration  of  the  notice  but  without  prejudice  to  the  rights  and  remedies  of  the 
governor  in  respect  of  any  prior  breach  or  nonperformance  by  the  lessees  of  any  of 
such  obligations. 

9.  Notice  of  breach. — In  the  event  of  the  breach  by  the  said  lessees  of  any  of  the  cove- 
nants, conditions,  stipulations  or  provisions  herein  contained,  including  the  provisions 
for  the  payment  of  rents  and  royalties  as  above  provided,  then  and  in  every  such  case, 
and  if  ana  whenever  the  same  shall  arise,  the  governor  may,  by  the  colonial  secretary 
of  the  Colony  for  the  time  being,  give  the  lessees  notice  of  the  breach  complained  of 
and  call  upon  the  lessees  to  remedy  the  same  and  in  the  event  of  the  lessees  not  doing 
80  within  three  calendar  months  thereafter  the  governor  may  cancel  and  determine 
this  lease  and  all  the  licenses,  pri\ileges  and  powers  granted  to  the  lessees. 

10.  Arbitration. — In  the  event  of  any  disagreement  between  the  parties  hereto  as  to 
the  meaning  of  any  clause  hereof  or  touching  any  matter  arising  out  of  the  same  or 
connected  therewith  and  not  by  this  deed  expressly  agreed  or  intended  to  be  deter- 
mined by  the  governor  or  by  the  lessees  or  hereby  expressly  directed  to  be  determined 
by  the  governor  or  by  the  lessees  or  hereby  expressly  directed  to  be  determined  by 
arbitration  under  the  provisions  of  the  arbitration  act  of  1889  of  the  Imperial  Parlia- 
ment or  any  statutory  modification  or  reenactment  thereof  for  the  time  being  in  force, 
the  matter  shall  be  referred  to  two  arbitrators,  one  to  be  chosen  by  the  Secretary  of 
State  for  the  Colonies  and  the  other  by  the  lessees,  with  power  to  appoint  an  umpire 
in  case  of  disagreement.  Such  arbitration  to  be  held  in  Trinidad  and  be  deemed  a 
reference  to  arbitration  under  the  provisions  of  the  arbitration  ordinance  No.  41  or  any 
ordinance  or  law  amending  or  replacing  the  same  for  the  time  being  in  force. 

11.  For  purposes  of  arbitration  in  England  the  deed  to  be  an  English  contract. — For  the 

Eurposes  of  any  arbitration  which  under  any  of  the  provisions  herein  contained  is  to 
e  held  under  the  provisions  of  th^  arbitration  act  of  1889  of  the  Imperial  Parliament 
or  of  any  statutory  modification  or  reenactment  thereof  for  the  time  being  in  force  this 
deed  shall  be  construed  and  have  effect  as  a  contract  made  in  England  and  in  accord- 
ance with  the  law  of  England. 

12.  The  italic  side  headings  are  for  convenience  only  and  do  not  form  part  of  this 
lease.  . 

PART  X. 

In  this  lease  "crude  oil"  means  the  natural  produce  of  the  wells  or  springs  of  oil 
before  the  same  has  been  refined  or  otherwise  treated,  except  for  the  removal  of  water 
and  foreign  substances. 

"Products' '  means  any  part  of  such  crude  oil  which  is  obtained  by  any  process  of 
separation,  and  shall  include  oil  fuel. 

"Oil  fuel"  means  that  product  of  the  crude  oil  which  complies  with  the  following 
admiralty  specification  as  regards  flash  point,  fluidity  at  low  temperatures,  percentage 
of  sulphur,  presence  of  water,  acidity,  and  freedom  from  impurities,  provided  that 
the  term  "oil  fuel"  shall  be  held  to  represent  the  largest  percentage  of  such  product 
commercially  obtainable  from  the  crude  oil,  viz: 

The  flash  point  shall  not  be  lower  than  200°  F.,  close  test  (Abel  or  Pensky-Martens). 

The  proportion  of  sulphur  contained  in  the  oil  shall  not  exceed  0.75  per  cent  unless 
it  can  be  snown  to  the  satisfaction  of  the  governor  that  it  is  commercially  impossible 
to  reduce  the  percentage  of  sulphur  to  or  below  0.75  per  cent. 

The  oil  shall  be  as  free  from  acidity  as  the  character  of  the  crude  oil  will  allow. 

The  quantity  of  water  delivered  with  the  oil  shall  not  exceed  0.5  per  cent. 

The  oil  shall  be  sufficiently  free  from  paraffin  or  bitumen  to  flow  freely  by  gravita- 
tion, with  2  feet  head,  at  a  temperature  of  32°  F.,  through  a  horizontal  length  of  3  feet 
of  half -inch  bore  copper  pipe. 

The  oil  shall  be  free  from  earthy,  carbonaceous,  or  fibrous  matter,  or  other  impuri- 
ties which  are  likely  to  choke  the  burners. 

The  oil  shall,  if  required  by  the  inspecting  officer,  be  strained  by  being  pumped,  on 
discharge  from  the  tanks  or  tank  steamer,  through  filters  of  wire  gauze  having  16  meshes 
to  the  inch. 


35904—23 


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122 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


(iV)   PIPE-LINE  AGREEMENT.* 


This  indenture  made  the 


day  of 


1913.  between  Sir  Reginald  Laurence 


Antrobus,  K.  C.  M.  G.;  Maurice  Alexander  Cameron,  C.  M.  G.,  late  a  major  in  His 
Majesty's  Corps  of  Royal  Engineers;  and  William  Hepworth  Mercer,  Esq.,  C.  M.  G.; 
all  of  Whitehall  Gardens,  in  the  city  of  Westminister,  the  Crown  agents  for  the  Colo- 
nies— hereinafter  called  the  "Crown  agents" — acting  for  and  on  behalf  of  the  Govern- 
ment of  the  Colony  of  Trinidad  and  Tobago  and  its  dependencies— hereinafter  called 
"the  government"— of  the  one  part  and  the  United  British  West  Indies  Petroleum 
Syndicate  (Ltd.),  whose  registered  office  is  at hereinafter  called  "the  syndi- 
cate " — of  the  other  part. 

Whereas  it  is  provided  by  section  4  of  the  petroleum  Cpipe  lines)  ordinance,  1911, 
hereinafter  called  "the  ordinance,"  that  it  shall  not  be  lawful  for  any  person  to  use 
or  to  lay  and  connect  on  any  land  in  the  Colony — whether  such  land  is  or  is  not 
the  property  of  any  such  person — any  pipes  for  conveying  oil  without  the  permissioa 
of  the  governor  in  executive  council  ana  that  this  permission  may  be  granted  upon 
Buch  terms  and  conditions  as  the  governor  in  executive  council  may  think  fit;  and 

Whereas  it  is  further  provided  by  section  18  of  the  ordinance  that  it  shall  be  lawful 
for  the  governor  in  executive  council  to  declare  that  any  pipe  line  or  system  of  pipe 
lines  shall  be  common  carriers  and  that  after  the  publication  of  such  declaration  in 
the  Royal  Gazette  the  owners  or  operators  of  such  pipe  lines  shall  make  full  and  ade- 
quate provision  in  regard  to  the  carriage  of  crude  oil  as  such  common  carriers  in  accord- 
ance with  the  provisions  of  the  section  and  with  such  rules  and  regulations  as  mav 
from  time  to  time  be  made  under  such  section  by  the  Governor  in  executive  council; 
and 

Whereas,  it  \s  further  provided  by  section  19  of  the  ordnance  that  the  rules  and  regu- 
lations in  question  may,  among  other  things,  fix  a  limit  to  the  rates  which  the  owners 
or  operators  of  pipe  lines  may  charge  for  llie  carriage  of  oil  and  the  terms  and  condi- 
tions upon  which  such  owners  and  operators  shall  be  bound  to  carry  oil;  and 

Whereas  the  syndicate  have  intimated  their  intention  to  apply  to  the  Government 
for  a  license  to  prospect  for  oil  on  Crown  lands  in  the  colony  and  if  satisfied  with  the 
results  of  their  investigations  to  acquire  an  oil  mining  lease  over  an  area  or  areas  not 
exceeding  100,000  acres;  and 

Whereas  the  terms  and  conditions  upon  which  such  prospecting  license  and  lease  are 
respectively  to  be  granted  have  been  agreed  between  the  Government  and  the  syn- 
dicate; and 

Whereas  the  syndicate  have  represented  to  the  Government  that  it  will  be  necessary 
for  them  to  lay  and/or  connect  and /or  use  pipe  lines  in  the  furtherance  of  their  own 
business  and  that  they  desire  to  know  the  terms  and  conditions  upon  which  the  gov- 
ernor in  executive  council  will  grant  them  permission  to  lay  and/or  connect  and/or 
use  pipe  lines  as  they  may  from  time  to  time  require;  and 

Whereas  the  syndicate  have  further  represented  that  they  will  be  willing  from  time 
to  time  to  provide  main  trunk  lines  on  a  scale  adequate  to  the  oil  industry  of  the  colony 
and  from  time  to  time  such  other  pipe  lines  to  facilitate  the  collection  and  transport  of 
the  oil  of  other  producers  as  well  as  their  own  oil  as  may  be  desirable,  with  due  regard 
to  the  circumstances  of  each  particular  case;  and 

Whereas  the  syndicate  have  represented  to  the  Government  that  they  are  prepared 
to  carry  on  their  business  in  the  colony  on  a  scale  commensurate  with  the  area  to  be 
included  in  the  license  or  oil  mining  lease  proposed  to  be  applied  for  by  the  syndicate 
as  aforesaid  and  to  provide  from  time  to  time  suitable  and  adequate  facilities  for  the 
collection  and  conveyance  of  crude  oil  sufficient  to  meet  the  reasonable  requirements 
of  the  oil  industry  in  the  colony  as  a  whole;  and 

Whereas  the  parties  hereto  have  agreed  that  these  presents  should  be  entered  into 
for  the  purpose  of  evidencing  the  terms  and  conditions  upon  which  the  syndicate  will 
be  granted  permission  to  use  or  to  lay  and  connect  pipe  lines  in  the  colony. 

Now  this  indenture  witnesseth  that  it  is  hereby  agreed  between  the  parties  hereto 
as  follows: 

1.  Applications  for  pipe  lines  within  lands  of  the  syndicate  to  be  granted  as  of  course.— 
Any  applications  which  the  syndicate  may  from  time  to  time  make  under  section  4 
of  the  ordinance  for  permission  to  lay  and/or  connect  and/or  uee  ])ipe  lines  for  the  con- 
veyance of  oil  on  any  lands  included  in  the  said  proposed  prospecting  license  or 
lease  to  the  syndicate  or  on  any  freehold  property  of  the  synclicate  or  any  leasehold 
property  held  by  the  syndicate  in  the  colony  for  a  term  having  at  the  date  of  such 
application  being  made  not  less  than  five  years  unexpired  shall  if  made  in  the  manner 
prescribed  by  or  under  the  ordinance  and  provided  the  grant  thereof  does  not  involve 

» This  agreement  was  executed  on  the  28th  April,  1913. 


^■^-^ 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


123 


any  avoidable  interference  with  the  ordinary  means  of  communication,  or  any  unnec- 
essary interference  with  agriculture,  be  granted  as  a  matter  of  course  and  without 
delay. 

2.  Applications  for  pipe  lines  within  lands  over  which  the  syndicate  has  easements  to 
be  dealt  with  promptly  and  not  to  be  unreasonably  refused. — Any  applications  which  the 
syndicate  may,  from  time  to  time,  make  under  the  ordinance  for  permission  to  lay 
and/or  connect  and/or  use  pipe  lines  under  or  over  lands  in  the  colony,  of  which  the 
syndicate  are  neither  owners  nor  lessees  but  under  or  over  which  the  syndicate  may 
have  obtained  by  agreement  with  the  owners  thereof  and  without  the  exercise  of 
any  compulsory  powers  under  section  8  of  the  ordinance,  way  leaves  or  easements 
for  laying  and/or  connecting  and/or  using  the  same,  shall  be  dealt  with  and  determined 
by  the  Government  with  all  reasonable  dispatch,  and  permission  shall  not  be  unrea- 
sonably withheld  if  the  laying  and/or  connecting  and/or  using  of  the  pipe  lines  will 
be  conducive  to  the  more  economical  working  of  the  syndicate's  business  or  if  such 
permission  is  necessary  as  part  of  a  scheme  for  a  main  trunk  line. 

3.  Aj)plications  for  main  trunk  lines  to  be  favorably  considered. — On  receipt  of  a  writ- 
ten notification  that  the  syndicate  is  prepared  to  undertake  the  obligations  imposed 
by  section  18  of  the  ordinance  in  respect  to  a  proposed  pipe  line  or  lines,  any  specific 
application  which  the  syndicate  may  from  time  to  time  make  under  such  section  for 
permission  to  lay  and /or  connect  and/or  use  pipe  lines  to  be  used  as  main  trunk  lines 
shall  be  favorably  considered  by  the  governor,  and  if  the  syndicate  has  laid  and  is 
working  satisfactorily  any  such  main  trunk  line  as  a  common  carrier  within  the  mean- 
ing of  such  section  the  governor  will  not  sanction  the  construction  of  U  competing 
main  trunk  line  unless  the  need  for  it  is  established  to  the  satisfaction  of  the  governor 
and  the  syndicate  is  unable  or  unwilling  to  supply  the  need.  Provided  that  nothing 
in  this  clause  contained  shall  be  deemed  to  impose  on  the  governor  any  obligation 
to  prevent  an  owner  or  owners  of  oil-mining  rights — not  being  a  combination  of 
owners  for  this  purpose  only — from  laying  and/or  connecting  and/or  using  pipe  lines 
on  his  or  their  own  property  or  on  any  property  of  which  he  or  they  may  be  lessees 
or  tenants  and  thence  to  a  refinery  or  a  shipping  place  for  the  conveyance  of  oil  won 
from  any  area  oVer  which  he  or  they  own  oil-mining  rights  so  long  as  such  pipe  lines 
are  used  only  for  the  conveyance- of  such  oil. 

4.  Licenses  to  include  means  of  communication. — Any  permission  to  lay  and/or  con- 
nect and/or  use  any  pipe  line  shall  include  permission  to  construct  and  use  any 
telephone  or  telegraph  lines  or  other  means  of  communication  (other  than  and  except 
radiotelegraphy)  which  may  be  necessary  or  desirable  for  the  satisfactory  working 
of  such  pipe  line. 

5.  Provisions  as  to  transmission  of  oil  by  trunk  main  lines. — In  any  rules  and  regu- 
lations which  may  from  time  to  time  be  made  by  the  governor  in  executive  council 
under  section  18  of  the  ordinance  regard  shall  be  had  to  the  following  provisions: 

(a)  Syndicate  to  be  entitled  to  charge  maximum  rates  to  be  fixed  by  the  governor. — The 
maxim tfhi  rates  to  be  charged  by  the  syndicate  for  the  transport  of  oil  by  means  of 
their  main  trunk  lines  shall  be  sufficient  to  cover  all  costs  of  working  upkeep  and 
maintenance  to  allow  amortization  at  the  rate  of  7^  per  cent  per  annum  on  the  capital 
cost  of  the  pipe  lines  and  to  allow  the  owners  5  per  cent  per  annum  to  cover  interest 
and  5  per  cent  per  annum  for  profit.  The  rates  so  fixed  snail  be  based  upon  the  total 
number  of  tons  of  their  own  oil  and  of  the  oil  of  other  parties  actually  transported  by 
the  syndicate  by  means  of  their  main  trunk  lines. 

(b)  Provisional  rates  to  be  fxed  yearly  in  advance. — Provisional  rates  to  lie  charged  by 
the  syndicate  shall  be  agreed  upon  between  the  governor  and  the  syndicate  year  by  year 
in  advance:  Provided,  That  if  the  rate  finally  fixed  for  any  year  shall  he  less  than  the 
rate  provisionally  fixed  the  syndicate  shall  forthwith  repay  to  all  persons  the  excess 
which  they  may  haxe  paid  during  the  year  beyond  what  they  would  have  been  liable 
to  pay  if  the  provisional  rate  had  been  equal  to  the  rate  finally  fixed,  and  that  if  in 
any  year  the  rate  finally  fixed  shall  be  greater  than  the  provisional  rate  the  syndicate 
shall  be  entitled  to  recover  from  all  persons  who  shall  have  transported  oil  or  products 
of  oil  through  the  main  trunk  lines  during  the  year  the  difference  between  the  sums 
paid  by  them  and  the  sums  which  they  would  have  been  liable  to  pay  if  the  pro- 
Adsional  rate  had  been  equal  to  the  rate  finally  fixed,  and  shall — without  prejudice  to 
other  means  of  recovery — until  payment  thereof  have  a  lien  therefor  on  all  oil  or  prod- 
ucts of  oil  thereafter  delivered  by  such  persons  for  transport  by  such  main  trunk  lines. 

(c)  Syndicate  to  be  only  under  obligation  to  transport  oil  for  uhich  the  pipe  line  was 
constructed. — The  syndicate  shall  only  l)e  under  obligation  to  transport  crude  oil  or 
that  product  of  crude  oil  for  which  the  pipe  line  was  constructed. 

(d)  Syndicate  may  make  regulations  with  approval  of  governor  to  avoid  mixing  of  oils. — • 
The  sATidicate  shall  be  at  liberty,  subject  to  the  approval  by  the  governor,  from  time 
to  time  to  make  and  vary  such  regulations  as  may  be  reasonably  requisite  to  avoid 


'f:. 


^^"W 


■■F 


•^1 


124 


FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


or  minimize  undue  mixing  of  oils  or  danger  of  such  mixing  and  for  regulating  the 
minimum  quantities  of  each  particular  grade  of  oil  or  products  of  oil  acceptable  for 
transport. 

{e)  Syndicate  may  make  a  S  per  cent  deduction  for  leakage. — For  evaporation  and 
leakage  during  transport  the  syndicate  shall  be  authorized  to  make  a  deduction  of 
3  per  cent  of  the  oil  transported,  but  as  at  the  end  of  each  calendar  year  actual  stocks 
shall  be  taken  and  any  difference  between  the  actual  leakage  and  the  3  per  cent 
shall  })e  adjusted  with  the  senders  pro  rata,  pro\'ided  that  in  making  the  adjustment^ 
if  any,  no  regard  shall  be  paid  to  differences  in  quality  of  oil..  The  syndicate  shall  be 
empowered  to  collect  from  the  senders  any  surplus  which  the  rate  finally  fixed  may 
show  over  the  provisional  one,  and  if  necessary  to  recover  the  same  by  the  exercise 
of  a  lien  on  any  oil  which  such  defaulting  sender  may  subsequently  deliver  for 
transport. 

(/)  Sjpidicatc  not  to  he  required  to  promde  storage.- — The  syndicate  shall  not  be  bound 
to  provide  storage  for  the  oil  before  dispatch  or  for  the  reception  of  the  oil  at  the  point 
of  delivery. 

(g)  Syndicate  to  provide  appliances  and  afford  facilities  for  measuring  oil  transmitted. — 
The  syndicate  shall  provide  all  necessary  appliances  for  measuring  all  oil  and  products 
of  oil — as  well  their  own  as  those  of  other  persons — transmitted  through  such  main 
trunk  lines,  and  shall  keep  true  and  proper  accounts  thereof,  and  shall  permit  the 
governor  or  his  representative  at  all  reasonable  times  to  inspect  and  test  such  appli- 
ances and  to  examine  and  check  such  accounts, and  shall  afford  all  necessary  facilities 
ill  that  behalf. 

6.  Governor  in  framing  regulations  to  consider  representations  of  syndicate  and  others. — 
In  framing  regulations  under  the  ordinance  the  governor  in  executive  council 
will  take  into  consideration  any  representations  made  to  him  bv  the  syndicate  as  well 
as  by  other  persons,  and  such  regulations  shall  be  framed  with  due  regard  to  the  needs 
of  the  syndicate  for  the  purposes  of  their  business  and  in  general  accordance  with  the 
true  intent  and  meaning  of  these  presents. 

7.  puration  of  agreement. — Subject  as  hereinafter  provided,  this  agreement  shall 
remain  in  force  until  the  17th  dav  of  January,  1916,  and  thereafter  so  long  as  the 
syndicate  or  its  permitted  assigns  shall  hold  an  oil-mining  lease  from  the  government 
and  provide  all  such  main  trunk  lines  and  facilities  for  the  transport  of  oil  or  ])roduct8 
of  oil — whether  their  own  or  those  of  other  producers — as  may  from  time  to  time  be 
reasonably'  necessary  and  adequate  to  meet  the  requirements  of  the  oil  industry  in 
the  colony  as  a  whole. 

8.  Power  to  governor  to  cancel  agreement. — If  an  order  shall  be  made  by  a  court  of 
competent  jurisdiction  or  an  effective  resolution  shall  be  passed  for  the  winding-up 
of  the  syndicate  otherwise  than  for  the  purpose  of  reconstruction  or  amalgamation,  or 
if  the  syndicate  shall  fail  to  perform  or  observe  any  of  the  obligations  or  conditions 
imposed  upon  it  by  these  presents,  it  shall  be  lawful  for  the  governor  by  notice  in  wTiting 
to  the  syndicate  to  cancel  and  make  void  this  agreement  without  prejudice*  to  any 
antecedent  claim  of  the  government  against  the  syndicate  in  respect  of  any  breach 
by  the  syndicate  of  any  of  their  obligations  hereunder. 

9.  Synidicate  may  assign  this  agreement  with  permission. — The  syndicate  may,  subject 
to  the  previous  consent  in  writing  of  the  governor,  assign  or  otKerwise  dispose  of  this 
a,greement  to  any  company  formed  for  the  purpose  of  constructing  and  working  pipe- 
lines in  the  colony. 

10.  Notices. — Any  notice  to  the  syndicate  under  or  in  connection  with  this  agree- 
ment may  be  given  by  leaving  the  same  addressed  to  the  syndicate  at  their  principal 
office  in  the  colony ,  or  at  their  registered  office  in  England, and  every  such  notice  shall 
be  deemed  to  be  given  at  the  time  when  the  same  shall  be  so  left.  Any  notice, 
authority,  or  other  act  of  or  on  the  part  of  the  governor,  under  or  in  connection  with 
this  agreement, shall  be  sufficient  and  binding  on  the  parties  hereto  if  the  same  be  in 
writing  and  signed  by  the  governor  for  the  time  being  of  the  colony  or  by  one  of  the 
Crown  agents. 

11.  Governor  and  Crown  agents  not  to  be  personally  liable. — Nothing  herein  contained 
shall  impose  any  personal  liability  on  the  governor  or  the  Crown  agents,  or  any  of  them, 
or  on  any  member  or  officer  of  the  government. 

12.  The  italic  side  headings  are  for  the  purpose  of  convenience  only  and  do  not  form 
part  of  and  shall  not  affect  the  construction  or  the  interpretation  of  these  presenta. 

In  witness,  etc. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 

Exhibit  17. 


125 


LETTER  SINCLAIR  CONSOLIDATED  OIL  CORPORATION,  AUGUST   1.  1922. 

Sinclair  Consolidated  Oil  Corporation, 

New  York,  August  1, 1922. 
Mr.  Otis  B.  Johnson, 

Acting  Secretary  Federal  Trade  Commission, 

Washington,  D.  C. 

Dear  Sir:  Replying  to  your  favor  of  July  26  in  reference  to  the  inquiry  the  com- 
mission is  making  into  certain  aspects  of  the  petroleum  trade,  in  compliance  \^ith 
Senate  Resolution  No.  311,  beg  to  advise  you  as  follows: 

1.  In  Trinidad — which  is  a  British  Crown  Colony,  controlled  directly  bv  the  Crown 
agents  and  colonial  secretary  in  London — ^all  leases  to  government  lands  contain  a 
provision  to  the  effect  that  the  lease  will  become  void  if  the  lessee,  which  must  "be 
and  remain  a  British  company, "  or  any  of  the  lands  comprised  in  the  lease  become 
"controlled  or  managed,  directly  or  indirectly,  by  a  foreigner  or  foreigners,  or  a  foreign 
corporation  or  corporations. " 

2.  France:  Under  the  administrative  practice  in  France  it  is  impossible  for  a. 
foreigner  to  obtain  an  oil  concession,  and  the  government  has  adopted  the  policy  of 
granting  such  concessions  only  on  the  basis  that  67  per  cent  of  the  shares  of  the  com- 
pany be  French  capitq,l  and  remain  in  French  hands.  In  practice  it  has  been  found 
that  France  and  the  French  Colonies  are  more  completely  closed  to  development  by 
American  companies  than  in  any  other  part  of  the  world, 

3.  There  are,  or  have  been,  restrictions  in  Burma  and  India  which  have,  so  far, 
prevented  American  capital  from  participating  in  the  development  of  this  region. 

4.  The  Dutch  Government  and  the  Dutch  East  Indian  Government  have  shown 
a  great  reluctance  to  permit  American  capital  to  participate  in  the  oil  development 
of  the  Dutch  East  Indies. 

Very  truly  yours, 

Sinclair  Consolidated  Oil  Corporation, 
By  G.  T.  Stanford,  General  Counsel. 


Exhibit  18. 


LETTER  STANDARD  OIL  CO.  (NEW  JERSEY),  AUGUST  4,  1922. 

Standard  Oil  Co., 

New  York,  August  4,  1922. 
Federal  Trade  Commission, 

Office  of  the  Secretary,  Washington,  D .  C. 

Dear  Sirs:  On  the  26th  ultimo  your  office  requested  that  we  give  you  information 
as  to  the  action  of  foreign  governments  tending  to  prevent  the  free  operation  of  Ameri- 
can corporations  or  citizens  in  their  countries  or  dependencies. 

For  your  information  we  give  you  the  following  memorandum  on  the  situation 
as  we  understand  it  in  some  of  the  countries  which  have  come  to  our  knowledge. 
I  might  add  that  in  some  cases  also  discretion  is  given  to  officials  of  the  government 
with  the  effect  that  the  discretion  is  exercised  in  a  direction  to  impede,  if  not  pre- 
vent, American  operations. 

Netherlands.— The  mining  law  of  the  Dutch  East  Indies,  which  is  distinct  from  that 
of  Holland,  provides  that  only  Dutch  subjects  or  persons  or  companies  legally  domi- 
ciled in  the  Netherlands  or  its  East  Indian  colonies  may  hold  prospecting  licenses 
and  mining  concessions.  Practically  we  have  found  a  discrimination  in  the  Dutch 
East  Indies  against  American  capital  through  the  refusal  of  the  Government  of  the 
Dutch  East  Indies  to  grant  prospecting  licenses  to  the  N.  K.  P.  M,  or  to  grant  mining 
concessions  except  in  cases  where  the  N.  K.  P.  M.  had  a  right  to  such  concessions 
under  the  provisions  of  the  old  mining  law  which  pro\ided  that  discovery  of  a  mineral 
under  a  prospecting  license  gave  the  right  to  a  concession.  That  mining  law  has  been 
abrogated  and  a  new  law  passed  which  leaves  the  granting  of  concessions  to  the  dis- 
cretion of  the  governor  general.  All  the  concessions  granted  to  the  N.  K.  P.  M. 
were  granted  under  the  old  law  on  rights  secured  as  a  result  of  the  discovery  of  the 
mineral  on  prospecting  licenses  granted  to  third  parties  and  purchased  by  the  N.  K. 

British  Empire. — At  present  there  is  no  restriction  on  foreign  interests  in  the  United 
Kingdom. 


i-K 


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126         FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 

Canada. — ^The  exploitation  of  petroleum  is  permitted  only  to  British  registered 
companies. 

India  and  Burma. — Prospecting  or  mining  leases  are  in  practice  granted  only  to 
British  subjects  or  to  companies  controlled  by  British  subjects. 

Trinidad.— Leases  on  Crown  lands  or  lands  alienated  by  the  Crown  for  agricultural 
purposes  since  January  17,  1902,  are  granted  only  to  British  subjects  or  British  con- 
trolled corapaniea.    No  restriction  on  private  lands. 

British  Honduras,  British  Guiana,  Nigeria,  Kenya. — Same  restrictions  as  in  Trinidad. 

So  far  as  our  information  goes,  there  are  no  restrictions  on  American  participation 
in  the  exploitation  of  petroleum  in  other  parts  of  the  British  Empire. 

Italy. — The  Italian  mining  law  does  not  specifically  exclude  foreigners  and  foreign 
companies  from  the  acquisition  and  development  of  petroleum  lands  but  in  practice 
the  Italian  Government  has  refused  to  grant  rights  in  this  direction  except  to  Italians 
or  companies  whose  directorate  is  entirely  Italian  and  at  least  two-thirds  of  whose 
capital  stock  is  owned  by  Italians.  The  mining  law  makes  this  provision  in  regard 
to  sulphur,  alkali  and  mineral  phosphates  and  the  Government  has  applied  the  same 
regulations  to  petroleum. 

Jrtprtn.— Mining  rights  can  not  be  held  by  persons  other  than  Japanese  subjects  or 
juridical  persons  established  according  to  Japanese  law.  (Art.  5  of  the  Japanese 
mining  law.) 

Very  truly  yours, 

E.  J.  Sadler. 


Exhibit  19. 


LETTER  MEXICAN  PETROLEUM  CO.  (LTD.).  JULY  28,  1922. 

Pan  American  Petroleum  &  Transport  Co., 
Mexican  Petroleum  Co.  (Ltd.),  of  Delaware, 

New  York,  July  28,  1922. 
Otis  B.  Johnson,  Esq., 

Acting  Secretary  Federal  Trade  Commission, 

Washington,  D.  C. 

Dear  Sir:  I  beg  to  acknowledge  receipt  of  your  two  letters  of  July  26  to  the  Mexican 
Petroleum  Co.  and  Pan  American  Petroleum  &  Transport  Co.,  respectively. 

Our  experience  in  regard  to  oil  production  in  foreign  lands  has  been  limited  to  the 
Republic  of  Mexico  and  our  answer  only  has  to  do  with  our  personal  knowledge  of 
that  country. 

Mexico  does  not  discriminate  against  American  citizens  or  companies  seeking  to 
develop  petroleum  resources  as  compared  with  any  other  foreigners.  An  attempt 
has  been  made,  however,  by  the  recent  constitution  ancj  decrees  under  it  to  discrimi- 
nate in  favor  of  Mexican  citizens  by  making  it  impossible  for  foreigners  to  acquire  oil 
properties  and  making  necessary  the  incorporation  of  Mexican  companies.  No 
foreigners,  however,  are  especially  favored  in  this  matter  and  all  are  treated  alike. 

There  is  no  discrimination  against  American  citizens  with  respect  to  ownership  of 
shares  in  corporations  organized  to  acquire  or  exploit  oil  lands  or  otherwise  engage 
in  the  petroleum  industry. 

The  Department  of  State  of  the  United  States  can  inform  you  on  the  recent  attempt 
in  Mexico  to  abridge  and  impair  and  end  petroleum  rights  already  held  by  Americans 
and  all  other  foreigners  and  Mexicans  in  Mexican  lands.  The  le.pl  difficulties  in 
Mexico  are  rather  basic  and  related  to  the  international  concept  of  property  than  a 
discrimination  against  Americans  or  any  other  foreigners. 
Yours  very  truly, 

H.  Walker, 
For  Mexican  Petroleum  Co. 

Pan  American  Petroleum  &  Transport  Co. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


Exhibit  20. 


127 


LETTER  SINCLAIR  CONSOLIDATED  OIL  CORPORATION,  FEBRUARY  2,  1923. 

Sinclair  Exploration  Co., 

New  York,  February  2,  192S. 
Pederal  Trade  Commission, 

Washington,  B.C. 
(Attention  Mr.  Francis  Walker,  Chief  Economist.) 
Dear  Sir:  This  refers  to  your  cable  of  the  Ist  of  February  requesting  the  area  in 
flquare  miles  of  the  oil  concession  in  Sakhalin. 

The  area  of  the  northern  half  of  the  island  of  Sakhalin  belonging  to  Russia  is  given 
as  approximately  15,850  square  miles.  The  prospecting  rights  of  the  company  cover 
this  whole  area,  but  the  company  has  the  obligation  to  reduce  its  holdings  to  1,000 
square  versts  by  the  end  of  five  years.  The  Russian  verst  is  equal  to  280.8  acres,  so 
that  the  total  holdings  of  the  company  at  the  end  of  the  five  years  will  be  280,800  acres. 
I  hope  this  will  furnish  you  with  the  desired  information.  If  not,  I  shall  be  pleased 
to  give  you  anything  further  you  may  need  in  this  connection. 

Yours  very  truly, 

R.  Crandall. 


Exhibit  21. 


LETTER  SINCLAIR  CONSOLIDATED  OIL  CORPORATION,  NOVEMBER  3, 1922. 


Federal  Trade  Commission, 

Washington,  D.  C. 
Gentlemen: 


Sinclair  Exploration  Co., 

New  York,  November  3,  1922. 


In  July  of  1921,  following  up  a  suggestion  of  the  Secretary  of  Commerce,  the  Sinclair 
Co.  began  its  negotiations  with  the  Persian  authorities  for  an  oil  concession  over  the 
five  northern  Provinces  of  Persia,  which  are  stated  by  the  Persian  Government  to 
be  free  from  any  prior  concessions. 

These  negotiations  have  been  continued  to  the  present  date,  during  which  period 
the  Sinclair  Co,  has  had  active  opposition  from  a  combination  of  interests  of  the 
Standard  Oil  Co.  of  New  Jersev  and  the  Anglo- Persian  Oil  Co.  of  I  ondon. 

In  August  of  this  year  the  Persian  Government,  having  considered  the  two  con- 
-cession  contracts  submitted  to  it  by  the  respective  groups  to  be  unsatisfactory  in 
terms,  undertook  to  draw  up  a  model  form  of  concession,  which,  when  prepared,  will 
be  duly  submitted  to  the  respective  interests  above  mentioned  for  their  consideration 
and  signature.  In  the  event  that  both  companies  should  accept  and  sign  the  same 
•contract,  the  Persian  Parliament  will  then  undertake  to  decide  to  which  interest  the 
•concession  shall  be  awarded. 

The  Persian  Parliament  is  still  in  the  process  of  drafting  this  model  form  of  contract 
at  the  date  of  writing. 

To  refer  again  to  the  competition  the  Sinclair  Co.  has  encountered  in  endeavoring  to 
obtain  this  concession,  we  wish  to  state  that  early  in  1921  an  oil  concession  over  the 
area  referred  to  was  signed  between  the  Persian  Government  and  the  Standard  Oil 
Oo.  of  New  Jersey,  but  in  order  to  become  legal  this  required  the  ratification  of  the 
Persian  Parliament. 

While  this  ratification  was  pending,  Sir  John  Cadman,  a  director  of  the  Anglo- 
Persian  Oil  Co.  of  London,  cam«  to  the  United  States  and  while  here  entered  into  an 
agreement  on  behalf  of  his  company  with  the  Standard  Oil  Co.  of  New  Jersey  to  share, 
on  a  50-50  basis  with  the  latter  company,  the  Persian  concession  when  obtained. 
The  fact  of  this  agreement  was  given  to  the  press  by  the  parties  concerned. 

Public  knowledge  of  this  agreement  in  Persia,  where  the  desire  of  the  Government 
and  the  people  is  to  obtain  purely  American  capital,  was  sufficient  to  make  the  Parlia- 
mentary ratification  of  the  contract  signed  by  the  Persian  Cabinet  impossible. 


Yours  very  truly, 


A.  G.  Veatch,  Vice  President. 


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APPENDK  TABLES. 


Table  1. — Balance  sheets  of  the  Royal  Dutch  Co.,  December  31,  1917-1921. 

[Florin=40.2  cents.] 


Item. 


1917 


ASSETS. 

Unissued  shares 

Shares  in  foreign  companies 

Shares  in  American  companies. 

Other  securities 

Cash 

Debtors ^ 

Dividends  on  priority  stock 


Total. 


LIABILITIES. 


Ordinary  shares 

Preference  shares 

Priority  shares 

Creditors 

Unclaimed  dividends 

ity  stock 

Unclaimed  dividends 

Undistributed  dividends 

Bonus  shares,  1918 

Interest  account 

Reserve 

Profit  and  loss 


Florins. 

34,472,800 

105,231,081 

36, 279, 806 

4, 674, 212 

36,187,665 

73,645,763 

641,250 


1918 


291,132,577 


Florins. 

28,945,600 

127,446,055 

55,776,213 

4, 757, 251 

65,013,439 

77,025,021 

641,250 


359,604,829 


on  pnor- 


120, 000, 000 

1,500,000 

28,500,000 

6,979,247 


14, 591, 210 
106,685 


58,150 
75,023,716 
44,373,569 


Total [    291,132,577 


200,000,000 

1,500,000 

28,500,000 

5, 154, 283 

424, 382 

20, 083, 031 

737, 716 


1919 


Florins. 
156,182,000 
149,810,154 

58, 469, 213 


1920 


1921 


28,253,610 

185,023,407 

641,250 


578,379,634 


50,665 
30, 964, 441 
72,190,311 


359,604,829 


370, 000, 000 

1,500,000 

28,500,000 

44,095,694 

198, 437 

541,700 

1, 146, 230 


571, 116 

31,726,574 

100, 099, 883 


578,379,634 


Florins. 

49,273,000 
159,934,571 
185,922,834 


Florins. 
248, 543, 000 
172,370,209 
185,924,597 


93,396,040 

154, 556, 418 

641,250 


38,690,557 

94,261,621 

641, 250 


643,724,113  \      740,431,234 


370,000,000 

1,500,000 

28,500,003 

77,718,309 

281,309 

901, 102 

927,664 

3,472,312 

2,616,833 

28, 356, 220 

129,450,364 


570, 000, 000 

1,500,000 

28,500,000 

2,545,152 

69,300 
737,545 
771, 113 


32,209,946 
104,098,178 


643,724,113  i   740,431,234 


Table  2.— Stockholdings  of  the  Royal  Dutch  Co.,  1917-1921. 

[Florin=40.2  cents.] 


Item. 

1917 

1918 

1919 

1920                   1921 

FOREIGN. 

Bataafsche     Petroleum     Maat- 
schappij 

Florins. 
84,000,000 
57,600,000 
7,255,980 
7,200,000 
1,972,944 
1,969,357 

Florins. 

126,000,000 

57,600,000 

11,609,568 

7,200,000 

2,219,472 

1,969,357 

Florins. 

126,000,000 

57,600,000 

17,414,352 

25,200,000 

2,219,472 

2,495,740 

i 
i 

Florins.            Florins. 
180,000,000        180,000,000 
115,200,000         115,200,000 

26,121,528           26,121,528 

25,200,000           25,200,000 
4,438,944            7,398,144 

11,738,740           36,767,138 

Anglo-Saxon  Petroleum  Co 

Shell  Transport  &  Trading  Co . . . 
Asiatic  Petroleum  Co 

Soci6t6  Anonyme  Astra  Romana. 
Various  petroleum  companies... 

Total 

159,998,281 
54,767,200 

206,598,397 
79,152,342 

230,929,564 
81,119,410 

362,699,212  |      390,686,810 
202,764,641         218,316,601 

Less  difference  between  par  and 
book  value 

Total  (net) 

105,231,081 

127,446,055 

149,810,154 

159,934,571  i      172,370,209 

AMERICAN. 

Shell  Co.  of  California 

}    36,279,806 

55,776,213 

f    50,302,313 

\      7,717,500 

449,400 

118.210,434 
47,040,000 
20,672,400 

118,212,197 
47,040,000 
20,672,400 

Roxana  Petroleum  Corporation.. 
Ozark  Pipe  Line  Corporation 

Total  as  per  balance  sheets . 

141,510,887 

183,222,268 

208,279,367 

345,857,405 

358,294,806 

129 


,'       f^ 


130         FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 

Table  S.—Incmne  accounts  of  the  Royal  Dutch  Co.,  1917-1921. 

[Florin  =-40.2  cents,] 


Item. 

1917 

1918 

1919 

1920 

1921 

Income: 

Dividends   various 
onmnanies   ......... 

Florins. 

45,563,153.00 

4,050,675.00 

*"  "126,246.' 66" 

Florins. 

91,361,600.00 

5,021,291.00 

■■"294,"  254.' 66" 

Florins. 
112,682,080.00 
5,586,834.00 

477.'66' 

Florins. 
133,032,541.23 
5,698,&44.76 

5,020.50 

Florins. 
92,192,774.73 
10,576,307.60 

10,091.00 
»  4,390,770.00 

Interest  and  exchange . 
Dividends    lost   by 

limitation 

Sundry  revenues 

Total  income 

49,740,074.00 

96,677,145.00 

118,269,391.00 

138,736,206.49 

107,169,943.33 

Deductions: 

214,249.00 

71,940.00 

136,616.00 

392,599.00 

70,061.00 

203,549.00 

18,169,508.00 

48,294,59 

53,332.56 

328,470.19 

83,605,10 

8,772,140,00 

Loss  on  securities .. 

French  tax  on  priority 
shares  

98,879.65 

Administration    and 

other  expenses 

Expenses  renewal  div- 

439,009.00 
115,050.82 

Contractual      obliga- 

4,675.625.00 
268,075.00 

23,820,625.00 

tions  

Rpsprvp  for  taxes . .  • . . 

2,418,825.58 

Total  deductions . . . 

5,366,505.00 

24,486,834.00 

18,169,508.00 

9,285,842.44 

3,071,765.05 

Net  income 

44,373,569.00 

72,190,311,00 

100,099,883.00 

129,450,364.05     104,098,178.28 

1 

1  Contractual  obligations. 

Table  4 -Balance  sheets  of  the  Shell  Transport  &  Trading  Co.  (Ltd.),  December  31, 

1917-1921. 


Item. 


ASSETS. 

Property  (shares,  etc.). 

Debtors  and  loans 

Dividends  due 

Investments 

Cash 


Total . 


LIABILITIES. 


Capital 

Rpsprvcs  etc ,.-..--.----• 

Subsidiary  company's  account. 

Creditors 

Unclaimed  dividends 

Preferred  dividends  accrued... 
Profit  balance 


1917 


£9,510,859 

87,395 

2,349,478 

3,037,526 

105,492 


15,090,750 


1918 


£11,019,820 

226,153 

1,387,525 

2,764,924 

137,441 


15,535,863 


6,997,561 

4, 060, 000 

565,226 

174,854 

279,666 

25,000 

2,988,443 


1919 


1920 


£12,036,905 

412,484 

4,635,614 

8,112,506 

760,923 


25,958,432 


£16,588,461 

353,146 

4,435,331 

13,812,051 

122,713 


35,311,702 


1921 


£20,256,603 

99,671 

4,7-22,739 

6,820,359 

2,438,771 


34,338,143 


10,039,791 
1,060,000 


86,770 

373, 498 

2.5,000 

3,950,804 


Total. 


15,090,750        15,535,863 


14,857,641 
5,000,000 


290,867 

34,677 

25,000 

5,750,247 


21,321,296 
5,000,000 


175,602 

19,762 

25.000 

8,770,042 


25,958,432        35,311,702 


21,365,144 
5,000,000 


526,163 

26,826 

25,000 

7,395,010 


34,338,143 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  131 

Table  5. — Income  accounts  of  the  Shell  Transport  6c  Trading  Co.  {Ltd.),  1917-1921. 


Item. 


Dividends 

Interest  and  other  income. 


Total  income . 


Deductions: 

Administrative  expenses. 

Interest 

Depreciation 

Stamp  duties 

Expenses  on  new  issue. . 


Total  deductions. 
Ket  income 


1917 


£2,655,536 
119,094 


1918 


£2,771,903 
121, 700 


1919 


£4,573,341 
189,383 


2,774,630         2,893,603         4,762,724 


21,474 
95, 870 
19,228 


24,734 

"i,'42.V 
14,500 


136, 572 


40,659 


2,6.38,0.58  I       2,852,944 


29,354 


20,000 


1920 


£7,182,203 
486,439 


1921 


£5,143,632 
483,040 


7,668,642  I        5,626,672 


25,535 


39,250 


15,687 


100,000 


49,354 


4,713,370 


41,222 


139,250 


7,627,420  5,487,422 


Table  6, — Petroleum  production  of  the  Royal  Dutch-Shell  group,  in  barrels,  1917-1921. 


Country. 


United  States 

Dutch  East  Indies 

British  Borneo  (Sarawak) . 

Egypt 

Rumania 

Venezuela 

Mexico 

Trinidad 

Russia 


Total. 


1917 


9,767,000 

12,115,000 

533,000 

924,000 

1,000,000 
210,000 
737,000 


11,459,000 


36,745,000 


1918 


10,050,000 

12,254,000 

49(5,000 

1,905,000 

2,158,000 

376,000 

336,000 


3,020,000 


30,595,000 


1919 


9,511,000 

15,027,000 

586,000 

1,588,000 

1,716,000 

279,000 

19,651,000 


1920 


9,792,000 

16,400,000 

1,004,000 

1,023,000 

2,358,000 

516,000 

36,648,000 


48,358,000  67,741,000 


1921 


9,032,000 

16,482,000 

1,389,000 

1,245,000 

2,  .399, 000 

1,584,000 

51,528,000 

374,000 


84,03.3,000 


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Table  S.— Petroleum  'production  in  Russia  {millions  of  poods  '),  1910-1914. 


» 1  barrel=8J  poods. 


Companies. 

1910 

1911 

1912 

1913 

1914 

GENERAL  OIL. 

Mantachef 

29.5 

4.9 

21.7 

15.5 

5.3 

12.2 

23.0 

.4 

18.3 

9.3 

2.2 

3.9 

1.4 

2.3 

6.8 

.3 

28.3 

4.7 

14.2 

13.6 

4.6 

10.4 

19.7 

.6 

18.8 

5.1 

1.8 

.4 

.4 

1.9 

7.2 

.4 

24.8 

5.7 

15.5 

12.5 

4.8 

11.6 

17.1 

.9 

15.6 

5.7 

1.8 

3.6 

.8 

2.4 

5.2 

.5 

24.4 

5.0 

13.6 

11.7 

5.6 

13.0 

14.2 

.9 

14.2 

5.6 

1.7 

2.8 

.6 

2.3 

5.2 

.6 

17.9 

Society  Naphtalan 

4.4 

Moscou  Caucase 

10.7 

Lianosof 

9.2 

Ter  Akopof 

5.7 

Soci^t^  russe  "le  Naphte" 

17.2 

Caspienne 

12.1 

Soy  ousnik 

.9 

Mirsoeff  Freres 

11.7 

Aramazd 

5.5 

Soci^t^  Apch^ron 

1.2 

Chihovo 

2.8 

A  van  Yousbachof 

.3 

Soci6t^  russe  de  naphte 

2.7 

Maximof 

5.6 

Santo 

.8 

Belreersky 

.1 

Soci6t6  Moscow-Volga 

4.6 
1.1 
3.5 

4.5 
1.2 
3.1 

4.3 
1.5 

4.8 

3.8 
1.7 
6.4 

2.6 

Soci^td  Nijni-Novgorod 

1.8 

Rvlsky  Succnsseurs 

7.4 

Total 

166.2 

140.9 

139.1 

133.3 

120.6 

ROYAL  DUTCH-SHELL. 

CasDienne  et  de  la  Mer  Noire 

30.4 
7.6 
4.4 
8.7 
4.6 

32.6 

7.8 
4.8 
8.5 
3.9 

34.4 
6.4 
3.9 
9.6 
4.8 
1.0 
2.6 

14.3 

32.5 
5.4 
4.5 
8.5 
4.7 
4.5 
8.6 

10.4 

— - 

28.3 

Chibaef 

5.3 

Sooutchastniki 

3.5 

Caucase 

7.1 

Socit^te  russe  de  naphte 

2.7 

Oural-Casnienne 

9.5 

Caucase  du  Nord 

1.0 
20.2 

1.2 
22.0 

22.3 

Standard  russe  de  Grozny 

13.6 

T  otal 

76.9 

80.8 

77.0 

79.1 

92.3 

NOBEL. 

Soci^t^  Nobel 

67.3 
1.2 

66.8 
1.3 

70.5 

2.2 

.4 

1.7 

4.8 

68.4 

2.3 

2.6 

.8 

4.7 

62.9 

Soci(5t6  Tcheleken-Daeuestan 

2.5 

Soci(^t6  Emba 

6.5 

Socidt6  Tchimion 

1.4 
4.6 

1.8 
3.9 

1.0 

Soci^t^  russe  de  naphte 

2.7 

Total 

74.5 
272.7 

73.8 
263.3 

79.6 
275.5 

! 

78.8 
273.0 

75.6 

Miscellaneous 

272.0 

Grand  total (J^d^-;; 

590.3 
69.4 

558.8 
65.7 

571.2 
67.2 

564.2 
66.4 

560.5 
65.9 

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140         FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 


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FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


143 


Table  II.— Balance  sheets  of  the  Shell  Co.  of  California,  December  31,  1920  and  1921, 

and  June  30,  1922. 


Item. 


«r 


Fixed  assets: 


ASSETS. 


Oil  lands  and  improvements,  leaseholds,  etc 

Gosnell,  Edison  &  Taylor  tracts 

Signal  Hill  tracts 

Pipe-line  real  estate,  rights  of  way,  etc. . 

Refineries 

Distributing  plants  and  equipment 

Office  furniture  and  fixtures 

Patent  rights  (Simplex  Refining  Co.) . . . 

Reserve  for  depletion  and  depreciation.. 


Net  fixed  assets. 


Investments: 

Washington  Refining  Go 

Silver  Shell  Steamship  Co 

Gold  Shell  Steamship  Co 

Pearl  Shell  Steamship  Co 

Asiatic  Petroleum  Co.  (New  York)  (Ltd.). 

Roxana  Petroleum  Corporation 

New  Orleans  Refining  Co 

Ozark  Pipe  Line  Corporation 

Matador  Petroleum  Co 


Total  investments 

Shell  Union  Oil  Corporation  consolidation  account 

Due  from  affiliated  companies 

v>iii roui/  l1SS6ls • .  «.....«•..>•«••>••-•«•>•->•-•■•• 

Dividends  accrued  on  preferred  stocks 

Deferred  charges 


Total. 


LIABILITIES. 


Capital  stock,  common 

Due  to  affiliated  companies 

Current  liabilities 

Reserve  for  Federal  income  tax 

Deferred  credit 

Appreciation  of  Gosnell  &  Edison  tracts 

Appreciated  surplus 

Appreciated  surplus  (Union  of  Delaware)... 

DliriJiLlS  ••••••••••■•■•••■•••••••••■••■••••«• 


1920 


tT' 


$49,147,421.82 
8,396,000.00 

■  ■«■««*»■*•«***< 

7,277,039.80 
1,507,719.91 
9,765,264.53 
3,643,137.26 
73,915.49 
1,000,000.00 


80,810,498.81 
12, 646, 797. 41 


68,163,701.40 


1,080, 
1,680, 
1,6S0, 
1,680, 
250, 
1,999, 
3,999, 
6,599, 


246.00 
000.00 
000.00 
000.00 
000.00 
9S2. 50 
700.00 
977. 50 


9, 400. 00 


18,979,306.00 

'"3,' 092,"  893."  34" 

7, 632, 236.  47 

189,111.75 

182,269.66 


98,239,518.62 


78,808,601.2,5 
3,631,863.78 
1,963,028.19 

'""i6s*756.'66" 
8,302,061.04 


5,425,214.36 


1921 


$52,652, 

10,890, 

5,956, 

6,856, 

1,511, 

10,615, 

4,226, 

84, 

500, 


380. 61 
592. 98 
938. 94 
820. 19 
957.53 
720.55 
195. 74 
186-97 
000.00 


93,294,793.51 
15, 727, 141.  62 


June  30,  1922. 


$74,471,268.62 

10, 890, 592. 98 

5,956,938.94 

6,833,676.91 

1,511,957.53 

10,800,355.32 

5,751,205.75 

100,443.52 


116,316,439.57 
22, 410, 065. 01 


77,567,651.89  I      93,906,374.56 


1,080, 
1,680, 
1,680, 
1,680, 

2.50, 
1,999, 
3,999, 
6,599, 

441. 


246  00 
000.00 
00(J.00 
000.00 
000.  00 
9.S2. 50 
700.00 
977.50 
400.00 
275.00 


I 


1,080,246.00 


40,940 


•19,419,581.00 

"*i,'i.55,'629.'i6' 
6,905,701.71 

"""iosjiio.'sg" 


105,153,074.59 


98,239,518.62 


78,808,601.25 

4,379,976.83 

1,391,13.5.50 

220, 000. 00 


16,847,531.92 
'*3'565,*829.'69" 


105,153,074.59 


1,121,186 

2,526,858 

65.5,010. 

8, 403, 892 


75 


75 
38 
54 
97 


106,613,323.20 


78,808,601.25 

2,519,839.89 

1,483,815.07 

110,000.00 

57,584.55 

"i6,'847,'53i.'92 
2,525,6.50.71 

4, 260, 299. 81 


106,613,323.20 


1 


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144         FOREIGN   OWNERSHIP   IN   THE   PETROLEUM   INDUSTRY. 

Table  12. — Balance  sheets  of  the  Roxana  Petroleum  Corporation,  December  31,  1920 

and  1921,  and  June  SO,  1922. 


Item. 


ASSETS. 


Oa  lands  and  leases,  oil  wells,  tanks,  refineries,  machin- 
ery, tank  cars,  automobiles,  funiituro  and  fixtures,  etc. 
Less  reserve  for  depreciation  and  depletion 


1920 


Net  fixed  assets , 

Investments 

Affiliated  companies  accounts , 

Current  assets , 

Prepaid  insurance,  discount  on  stock,  etc . 


$.54,361,833.12 
13,252,623.28 


1921 


$66,477,704.91 
15,978,997.19 


June  30, 1922. 


$73,180,957.29 
17,638,769.33 


Total. 


LIABILITIES. 


Preferred  stock 

Common  stock 

Purchase  money  obligations 

Affiliated  companies  accounts 

Notes  and  accounts  payable 

Deferred  credits 

Capital  surplus 

Surplus  and  inidivided  profits 

Shell  Union  Oil  Corporation,  capital  suri)lus. 


41,109,209.84 

264, 805. 50 

3, 347, 067. 01 

2,a30,196. 16 

79, 259. 44 


47,630,537.95 


3,690,300.00 

40, 000, 000. 00 

175,0()().00 

S9, 539.  70 

2.014,347.66 


1,661,350.59 


Total '    47,630,537.95 


50,-498,  707.  72 

2, 149, 815. 00 

1,019,641.29 

2,893,075.14 

69, 414.  26 


55, 542, 187. 96 

2,047,615.00 

59, 205. 50 

4,129,745.14 

297, 438. 34 


56,630,653.41  !      62,076,191.94 


3, 690, 300. 00 

40, 000, 000. 00 

2,128,400.47 

411,285.39 

2,960,297.12 


4, 68(),  963.  87 
2, 759, 406. 56 


3,690,300.00 
40,000,000.00 

'  *2,"62.5,'256."9i 
1,670, 62:^.66 
932,  a59. 07 
4,046,917.99 
3,863,433.76 
5,847,600.55 


56, 630, 6'>3. 41         62,076,191.94 


Table  \Z.— -Balance  sheets  of  the  Ozark  Pipe  Line  Corporation,  December  SI,  1920  and 

1921. 


Item. 


ASSETS. 


Fixed  assets 

Less  depreciation  reserve. 


Net  fixed  assets 

Current  assets 

Prepaid  insurance  and  discount  on  stock . 


Total. 


LIABILITIES. 


Preferred  stock 

Common  stock 

■  Notes  and  accounts  payable — 
Affiliated  companies'  accounts. 
Surplus , 


Total. 


1920 


$30,252,080.50 
2,309,274.58 


27,942,805.92 

214,200.39 

4,907.05 


28,161,913.36 


8,516,100.00 

18,400,000.00 

473,534.44 

1,280,851.12 

>  50S572.20 


28,161,913.36 


1921 


$30,291,463.14 
2,804,685.14 


27,486,778.00 

75,429.23 

8,560.11 


27,570,767.34 


8,616,100.00 

18,400,000.00 

66,983.19 

596,375.42 

18,691.27 


27,570,767.34 


1  Deficit. 

Table  lA.—Balan/x  sheet  of  the  Matador  Petroleum  Co.,  January  2,  1922. 

Fixed  assets , $623,719.42 

Less  reserve  for  depreciation  and  depletion 15,  973.  63 

Net  fixed  assets 607,  745.  79 

Current  assets 7,  507.  94 

Prepaid  expenses 364. 09 

Total 615,  617.  82 

Liabilities: 

Capital  stock,  common 614, 394.  56 

Accounts  payable 1>  223.  26 

Total 615,617.82 


''1 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


145 


Table  lb.— Balance  sheets  of  the  Union  Oil  Co.  of  California,  December  31, 1920  and  1921 . 


Item. 


ASSETS. 

Fixed  assets: 

Oil  lands,  rights,  and  leases 

Oil  wells  and  development 

Pipe  lines  and  storage  systems 

Steamship  and  marine  equipment.. 
Refineries  and  compressor  plants. . . 
Marketing  stations 


1920 


1921 


$31,467,379.14 

11, 948, 812.  .54 

11,098,822.01 

8,005,926.02 

9, 738, 130. 08 

10, 015, 247. 21 


Total 82,274,317.00 

Reserve  for  depreciation  and  depletion 23, 038, 059. 04 


$93,048,525.00 
20,655,968.00 


Net  fixed  assets !  59, 236, 257. 96 

Investments  and  advances,  controlled  companies :  2, 313, 322. 85 

Other  investments I  1, 461, 710. 99 

United  States  securities 8, 361, 880. 00 

Current  assets 29, 918, 244. 40 


Deferred  charges . . 


Total. 


LIABILITIES. 


Capital  stock 

First  mortgage  5  per  cent  bonds 

Purchase  money  obligations 

Bills  and  accounts  payable 

Interest  accrued 

Reserve  for  tax  and  other  contingencies . 

Operat  ing  reserves , 

Appropriated  surplus 

Unappropriated  surplus 


Total. 


813, 786. 26 


66,392,557.00 

2,291,182.00 

985, 155. 00 

750, 2.50. 00 

33,  .548, 883. 00 
647,610.00 


101,905,202.40  ]     104,615,637.00 


50, 
9, 

5, 

3, 

25, 

7, 


000,000.00 
24.-),  003. 00 
284,670.55 
566,692.51 
40, 3.53. 34 
96;i,023..52 
765,60.5.94 
000,000.00 
039, 253. 60 


101,905,202.46 


50,000, 

8,670, 

565, 

4,199, 

44. 

4,042, 

777, 

25, 0f)0, 

11,;>17, 


000.00 
000.00 
298.00 
258. 00 
370.  (X) 
2^5. 00 
2S1.00 
'J)0. 00 
141.00 


104,615,637.00 


Table  16. — Balance  sheets  of  the  Commonwealth  Petroleum  Corporation,  December  31, 

1920  and  1921. 


Item. 


Fixed  assets: 

Oil  lands  and  leases 

Oil  wells  and  development . 
Furniture  and  fixtures 


ASSETS. 


1920 


1921 


Total 

Reserve  for  depreciation  and  depletion. 


Net  fixed  assets 

Investments 

Current  assets 

Due  from  affiliated  companies. 
Deferred  items 


Total. 


LIABILITIES. 


Capital  stock 

Current  liabilities 

Due  to  affiliated  companies. 

Capital  surplus 

Surplus 


Total. 


$1,543,524.41 
315,561.06  j 
6,796.91  ! 


$1,-524,268.37 

138,194.06 

6,796.91 


1,86.5,882.38 


1,865,882.38 

10,744,431.50 

94,880.22 

3,512,091.85 

276,227.25 


16,493,513.20 


10,890,501.45 

1,877.78 

260,390.44 


5,340,743.53 


16,493,513.20 


1,669,259.34 
14,454.54 


1, 6.54, 804. 80 

10,744,431.50 

81,128.93 

3,307,719.17 

276,059.26 


16,064,143.66 


10,890,501.45 

1, 165. 38 

4,773.49 

5,514,688.75 

1346,985.41 


16,064,143.66 


I  Deficit. 


< 


'i      A 


I 


rs- 


W*    ^       i,^  / 


1  ■■'!. 


146         FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 

Table  17  ^Balance  sheets  of  (he  Columbia  Oil  Producing  Co.,  December  SI,  1920  and 

1921. 


Item. 


ASSETS. 

Fixed  assets: 

Oil  lands  and  leases 

Oil  wells,  development,  and  equipment . 

Materials  and  supplies 

G  eneral  office  equipment 


T  otal ; .•.:••,-••.••• 

Reserve  for  depreciation  and  depletion . 


1920 


$2,718,062.28 

1,973,793.19 

603,902.28 

1,196.60 


Net  fixed  assets 

Investments 

Current  assets 

Due  from  affiliated  compames. 


Total. 


UABILITIES. 


5, 2%,  954. 35 
1,268,676.61 


1921 


»2, 715, 962.  28 
2,319,856.07 


1,379.10 


4,028,277.74 
275,000.00 
892,093.32 
170,917.01 


5,366,288.07 


5,a37,197.45 
1,464,039.63 


3,573,157.82 
275,000.00 
541,702.78 
845,332.66 


5,235,193.26 


Capital  stock 

Current  liabilities 

Due  to  affiliated  companies . 
Surplus 


Total. 


3,418,891.50 
271,061.12 


1,676,335.45 


3, 418, 891.  50 
88,167.31 
71,305.06 

1,656,829.39 


5,366,288.07 


5,235,193.26 


Table  IS.— Balance  sheets  of  the  Western  Union  Oil  Co.,  December  31,  1920  and  1921. 


Item. 


1920 


1921 


ASSETS. 

Fixed  assets:  ,       ,     .  ^  n 

Oil  and  gas  leaseholds  and  real  estate *y 

■  Oil  wells,  development,  and  equipment ;     A 

Construction  work  in  progress | 

Well  materials  and  supplies 1 

General  office  equipment | 


797, 593. 00 
808,401.15 
657, 357. 78 
222, 582. 03 
18,296.15 


$3,797,593.00 

3,252,604.35 

24,057.62 

12, 515. 27 


Total 

Less  depreciation  and  depletion. 


7, 
1, 


504,230.11 
826, 895. 71 


Net  fixed  assets 

Investments 

Current  asset  s 

Due  from  afliliated  companies — 
Deferred  items 


5,677,334.40 

1,000.00 

232, 224. 59 

336,064.96 

5, 075. 00 


7,086,770.24 
2,243,115.28 


4,843,654.96 

1,000.00 

227, 507.  51 

908, 185. 55 

3.40 


Total :      6,251,698.95 


5,980,351.42 


LIABILITIES.  I 

Capital  stock 25l'oi3'55 

Current  liabilities ,  .,'r^'  cr^  q^ 

Due  to  affiliated  companies ;  o'l^'ore^'no 

Special  surplus,  appreciation ^'^3^!*M^ 


Surplus. 


101,834.33 


Total 6,251,698.95 


999,900.00 

104,676.12 

1,713,014.49 

3,189,303.00 

126,542.19 

5,980,351.42 


J  Denclt. 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 


147 


Table  \^.— Balance  sheets  of  the  United  Western  Consolidated  Oil  Co.,  December  SI, 

1920  and  1921. 


Item. 


-  ASSETS. 

Fixed  assets: 

Oil  lands  and  leases 

Cost  of  reorganization  and  acquisition  of  oil-lease  contracts 

Oil  wells  development  and  equipment 

Construction  work  in  progress 

General  office  equipment 

Reserve  for  depreciation  and  depletion 

Net  fixed  assets -  -  -  ■ 

Current  assets - 

Due  from  affiliated  companies 

LIABILITIES. 

Capital  stock • 

Current  liabilities 

Due  to  affiliated  companies 

Surplus 

Total 


1920 


1921 


$2,578,686.34 

1,058,225.00 

487,193.37 

7,991.25 

2,860.00 


$2,573,686.34 

1,058,225.00 

390,760.89 

393.'66 


4,134,955.96 
180,735.92 


4,023,065.23 
195,900.63 


3,954,220.04 

63, 232. 05 

750.00 


3,827,164.60 
44, 183. 19 
15,032.22 


4,018,202.09  3,886,380.01 


3,489,600.00 

5,492.61 

426,783.77 

96,325.71 


3,489,600.00 

2, 427. 39 

425, 788.  40 

'  31,435.78 


4,018,202.09  i        3,886,380.01 


1  Deficit. 

Table  2().— Balance  sheets  of  the  Dunlop  Oil  Co.,  December  SI,  1920  and  1921. 


Item. 


1920 


ASSETS. 

Fixed  assets: 

Oil  and  gas  leaseholds  and  real  estate 

Oil  weUs,  development  and  equipment — 


Total 

Less  depreciation  and  depletion . 


Net  fixed  assets 

Current  assets 

Due  from  affiliated  companies. 


$40,000.00 
113,327.04 


1921 


153,327.04 
104, 783. 42 


$50,000.00 
114,553.40 


164,553.40 
112,276.46 


48,.'>43.62 
49,58.5.28 
41, 794. 41 


52,276.94 
18,600.07 
79, 701. 03 


Total. 


139,923.31 


LIABILITIES. 


Capital  stock 

Current  liabilities. 
Surplus 


Total . 


200,000.00 

1,612.56 

161,689.25 


150,578.04 


200,000.00 

1,315.06 

150,737.02 


139,923.31 


150, 578. 04 


»  Deficit. 


I 


.:<   ' 


\i 


P-. 


4r* 


.r^<         i) 


148         FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 
Table  2\.— Balance  sheets  of  the  Eddystone  Oil  Corporation,  December  31 ,  1920  and  1921 


Item. 


ASSETS. 


Fixed  assets: 

Oil  lands  and  leases 

Oil  wells  and  development . 


Total ..-•• 

Reserve  for  depreciation  and  depletion . 


Net  fixed  assets 

Investments 

Current  assets 

Due  from  affiliated  companies. 
Advances  to  Tidal  Osage  Co... 


Total. 


LIABILITIES. 


Capital  stock 

Current  liabilities 

Kay  Count v  Oas  Co 

Due  to  affiliated  companies. 
Surplus 


1920 


$1,368,949.84 
1,442,927.14 


2,811,876.98 
154,467.40 


2,657,409.58 

5.00 

548,529.59 

7,672.76 


3,213,616.93 


500,000.00 
92,673.57 


Total. 


419, 147.  84 
2,201,795.52 


1921 


$1,598,007.26 
2,102,049.28 


3,700,056.54 
452,296.77 


3,247,759.77 

5.00 

542,772.44 

4,773.49 

60,000.00 


3,855,310.70 


500,000.00 

13, 132. 58 

75,000.00 

1,799,7S2.56 

1,467,395.56 


3,213,616.93  I        3,855,310.70 


Table  22.— Balance  sheets  of  the  National  Exploration  Co.,  December  31, 1920  and  1921, 


Item. 


ASSETS. 


Fixed  assets: 

Oil  lands  and  leases 

Oil  wells  and  development . 
Miscellaneous  properties. . . 


Reser\'e  for  depreciation  and  depletion. 


Total 

Investments 

Current  assets 

Due  from  afTiliated  companies. 
Deferred  items 


Total. 


LIABII-ITIES. 


Capil al  stock 

Current  liabilities 

Due  to  affiliated  companies. 
Surplus 


1920 


$3,131,441.38 

1,442,373.98 

191, 723. 36 


4,765,538.72 
50,663.24 


4,714,875.48 
*"92i,'759.'48 


172,831.26 


5,809,466.22 


1921 


$3,594,474.42 

2, 888, 307. 83 

42,979.96 


6,525,762.21 
135,634.85 


6,390,127.36 
25, 000. 00 

910, 075. 80 
48,135.39 

117,277.22 


7, 490, 615. 77 


Total. 


3,000,000.00 
2,  (M2, 144.  13  i 
710,000.00  I 
57,322.09  I 


3, 000, 000. 00 
377,  .'542. 71 

4, 167, 904.  86 
1  •>1,631.80 


5,809,466.22'        7,490,615.77 


» Deficit. 
Table  2?>.— Balance  sheet  of  the  Asiatic  Petroleum  Co.  {Del'avare)  {Ltd.),  June  30,  1922. 

Assets: 

Current  assets,  associated  companies $227,  378.  79 

Investments 6,  776, 700.  00 

Deferred  charjjes 67, 073. 19 

Cash  on  hand  in  bank 9, 075.  65 

Total "tToSO^.  63 

Liabilities: 

Capital  stock 5,000,000.00 

Current  liabilities — 

Associated  companies 2, 146,  787.  31 

Other  parties HO.  50 

Deferred  credit 13, 613. 56 

Surplus '  80,  283.  74 

Total 7.080,227.63 


»  Deficit. 


v> 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  149 

Table  2i.— Balance  sheet  of  the  Asiatic  Petroleum  Co,  {New  York)  {Ltd.),  June  SO,  1922, 

Assets: 

Capital  assets $26, 122. 13 

Current  assets — 

Associated  companies 457, 003.  92 

Other  parties ----  416,018.70 

Investments 22, 300.  00 

Deferred  charges 244, 221.  65 

Cash  on  hand  and  in  bank 5, 691.  56 

Inventories 66, 756.  72 

Total 1,  238, 114.  68 

Liabilities: 

Capital  stock •  250,000.00 

Current  liabilities — 

Associated  companies 719, 157. 85 

Other  parties 333, 414.  62 

Loans  from  affiliated  companies 235,  883.  48 

Reserve  for  depreciation 6,  778.  89 

Surplus '  30-,  120. 16 

Total 1,238,114.68 

Table  25. — Balance  sheet  of  the  Asiatic  Petroleum  Storage  Co.  {Panama)  {Ltd.),  Jane 

30,  1922. 

Capital  assets $75, 475.  42 

Current  assets — 

Associated  companies 28,  915. 02 

Other  parties 62,829.89 

Deferred  charges 823.  43 

Cash  on  hand  and  in  bank 7,  681.  48 

Inventories,  fuel  oil  in  storage 67,  304.  79 

Total 243,030.03 

Liabilities: 

Capital  stock  outstanding 77, 000.  00 

Current  liabilities — 

Associated  companies 131,  203. 03 

Other  parties 6, 341.  54 

Reserve  for  depreciation 41,  531.  65 

Surplus '  13,046.19 

Total 243,030.03 

Table  26. — Balance  sheet  of  the  Gold  Shell  Steamship  Co.,  June  SO,  1922. 

Assets* 

Capital  assets $585,  648.  40 

Current  assets,  associated  companies 619, 059.  76 

Inventories,  provisions : 2, 749.  52 

Total 1,207,457.68 

Liabilities: 

Capital  stock 650,000.00 

Current  liabilities,  other  parties 12,  738. 18 

Reserve  for  depreciation 466, 221.  96 

Surplus 78,497.54 

Total ■- 1.207,457.68 

»  Deficit. 


*■ 


7^ 'hi 


1%. 


\ 


150         FOREIGN   OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY. 

Table  27.— Balance  sheet  of  the  Silver  Shell  Steamship  Co.,  June  SO,  1922. 

Capital  assets .- ^t5?'?m'AQ 

Current  assets,  associated  companies o'4, 701.  by 

Inventories,  provisions 1, 551.  93 

Total 1,436,149.29 

LiabiUties:  p:if\  nn(\  m 

Capital  stock ^5?'™  2? 

Current  Uabilities,  other  parties .11'^^'  no 

Reserve  for  depreciation 458,  S6Z.  U9 

Surplus 310,  707. 19 

Total 1,436,149.29 

Table  2S.— Balance  sheet  of  the  Pearl  Shell  SUamship  Co,,  June  SO,  1922, 

^Capital  assets ^??Hoq  oq 

Current  assets,  associated  companies 5by,  4^d.  ^y 

Inventories,  provisions 2, 322. 16 

Total 1,192,021.90 

Liabilities:  cca  aaa  m 

Capital  stock ^^2'?SS?2 

Current  liabilities,  other  parties aqq  qro  a7 

Reserve  for  depreciation 439, 362.  47 

Surplus 98, 976.  28 

Total 1,192,02L90 

Table  29.— Balance  sheet  of  the  New  Orleans  Refining  Co.  (Inc.),  June  SO,  1922. 

Capital  assets -•  $3,847,29L00 

Current  assets—  , 

Associated  companies "^O;^*  ^j-  J^ 

Other  parties ^^Htr' It 

Deferred  charges J^-p  ^'^'  'J^ 

Cash  on  hand,  at  banks,  in  transit ll'»  757.  b9 

Inventories —  , 

Oil  stocks  on  hand  and  in  transit ''^^  ^l  d» 

Materials  and  supplies ^2, 817. 38 

Total 5,  539, 299. 56 

Liabilities: 

Capital  stock  authorized ^  /JK'  nnn'  nn 

Capital  stock  unissued !>  000, 000. 00 

Capital  stock  outstanding 4, 000, 000.  00 

Current  liabilities— 

Associated  companies ^y^.  ^J^-  \^ 

Other  parties ^93, 817. 54 

Reserve  for  depreciation ^  783, 835. 16 

Surplus '  330,  715.  57 

Total 5,539,299.56 

»  Deficit 


.V 


FOREIGN  OWNERSHIP  IN  THE  PETROLEUM  INDUSTRY.  161 

Table  30. — Balance  sheets  of  the  Dundee  Corporation,  December  Si ,  1920,  and  June  SO, 

1922. 


Item. 


Assets: 

Cash 

Loans  and  advances 

Investments— 

Roxana  Petroleum  Corporation . 
Ozark  Pipe  Line  Corporation... 
Shell  Union  Oil  Corporation 


Total. 


Liabilities: 

Preferred  stock 

Common  stock , 

Notes  payable,  American  Exchan^  National  Bank. 

Loan,  American  Exchange  Securities  Co 

Sundry  creditors 

Surplus 


Total. 


Dec.  31, 1920. 


June  30, 1922. 


fl01,014.70  1 
206,580.18 

1,350,030.00 
13,500.00 


$380.56 
168,317.58 


4,433,209.54 


1,671,124.88 


57,670.00 
675,015.00 


176.90 
938,262.98 


1,671,124.88 


4,601,907.68 


253,130.04 
100, 759. 45 

3,158,562.88 
35.65 

1,089,419.70 


4,601,907.68 


Table  31. — Balance  sheet  of  the   Union  Oil  Co.  {Delaware),  October  20,  1922. 

Assets: 

Properties  and  equipment — 

'2  10,000-dead-weight-ton  tankers  (at  cost) $3,906,269.65 

Furniture  and  fixtures  (at  cost) 19, 180. 84 


Investments — 

Shell  Union  Oil  Corporation,  common  stock. .  41, 012,  656. 08 

Central  Petroleum  Co.,  common  stock 103,  797.05 

Central  Petroleum  Co.,  preferred  stock 11, 653. 65 


$3,  925,  450. 49 


Current  assets — 

Cash  in  bank  and  on  hand 
Prepaid  expenses 


41, 128, 106.  78 


22,  823.  51 
1,  776.  83 


Deferred  items . 


24,  600.  34 
462.  38 


Total 45,078,619.99 


Liabilities: 

Current  liabilitie;?,  accounts  payable. 
Outside  interests  in  subsidiaries 


13,262.09 
17, 162. 18 

30,  424.  27 


Total 

Capital  stock  and  surplus: 

Capital  stock,  1,389,411  shares $47,  239,  486.  80 

Deficit 2, 191, 291. 08 

45, 048, 195.  72 

Total 45,078,619.99 

NoTB. — ^There  are  contingent  liabilities  estimated  at  $725,000. 


•Ti«rfss?qw«y 


■iju 


»!^ 


152         FOREIGN   OWNERSHIP  IN   THE  PETROLEUM  INDUSTRY. 

Table  ^2.— Capital  investment  in  the  Mexican  petroleum  industry,  in  pesos,^  by  na- 
tional interests,  December  31,  1922."^ 


Capital  invested. 

Interest. 

Land. 

Oil  wells. 

Pipe  lines. 

steel  tanks. 

Amount. 

Pro- 
portion. 

56.8 
36.9 

Amount. 

Pro- 
portiOTi. 

Amount. 

Pro- 
portion. 

Amount. 

Pro- 
portion. 

American 

British 

201,780,000 

130,980,000 

10,620,000 

7,080,000 

4,540,000 

114,000,000 
74.000.000 

57.0 

37.0 

3.0 

2.0 

1.0 

137,662,898 

30,118,045 

31,393,019 

58,595 

276,877 

69.0 
15.1 
15.7 

«2 

37,221,360 

16,984,180 

8,884,289 

87,761 

916,406 

58.1 
26.5 

Dutch 

3.0        6,000,000 
2.0        4,000,000 
1.3  !      2,000,000 

13.9 

Mexican 

Other 

.1 
1.4 

Total 

355,000,000 

100.0  i  200,000,000 

100.00 

199,509,434 

100.0 

64,093,996 

100.0 

Capital  invested.                , 

Interest. 

Concrete  and  other 
storage. 

Refineries. 

Ships  and  other  fa- 
cilities. 

Total. 

Amount. 

Pro- 
portion. 

Amount. 

Pro- 
portion. 

Amount. 

Pro- 
portion. 

Amount. 

Pro- 
portion. 

American 

British 

877,140 
560,000 

58.7 
37.5 

31,301,841 

21,133,974 

9,000,000 

51.0 
34.4 
14.6 

83,200,000 

71,000,000 

5, 300, 000 

300,000 

200,000 

52.0 
44.4 

606,043,239 
344,776,199 

58.2 
33.1 

Dutch 

3.3           71,197,^08 

6.8 

Mexican 

Other 

56,049 

3.8 

.2 
.1 

11,582,405 
7,933,283 

1.1 

.8 

Total 

1,493,189 

100.0 

61,435,815 

100.0 

160,000,000 

100.0 

1,041,532,434 

100.0 

I  Normal  value  of  Mexican  gold  peso  is  $0.4985. 
«  From  "  Revista  de  Hacienda,"  Jan.  29,  1923. 
»  Less  than  one-tenth  of  1  per  cent. 


o 


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WAmmatJ  BINDCR 

■   Syracuse,  N.  Y. 
— —  Stockton,  Calif. 


COLUMBIA  UNIVERSITY  LIBRARIES 


0041429524 


»*», 
I 


COLUMBIA   UNIVERSITY   LIBRARIES 

This  book  is  due  on  the  date  Indicated  below,  or  at  the 
expiration  of  a  definite  period  after  the  date  of  borrowing,  as 
provided  by  the  library  rules  or  by  special  arrangement  with 
the  Librarian  in  charge. 


•**ti 


tl 


OATE  BORROWED 

DATE  DUE 

OATE  BORROWED 

DATE  DUE 

■*    ^ 

^     -    i      '■       ■ 

■Sf^ 

1 

' 

C28(10-53)  lOOM 

^  c.Z 


U.S. Federal 'Trade  Coram < 


Foreign  ownership  in 
the  petroleum  industry' 

Feb.  12,1923 


f    ''^h^ 


i2^:^ 


.  f^fi^ 


A)5^  ^ 


MAR  1  7  1995 


06fut 


f 


BOUND 


AUG      1  1956 


.^" 


END  OF 
TITLE 


